Page 122 - Finac1 Test 1 slides
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INCOME TAXES
Prepayments
• Prepayments are amounts actually incurred in the current
year and therefore tax deductible in terms of section 11(a)
of the Income Tax Act.
• For accounting purposes, however, the amount is not taken
to the statement of profit or loss and other comprehensive
income as a deduction, but is disclosed as a current asset in
the statement of financial position.
• The temporary difference occurs because the amount will
be claimed as a deduction for tax in the current year, but
will only be taken to the statement of profit or loss and
other comprehensive income as an expense in the following
year. The carrying amount will be equal to the amount of
the prepayment and the tax base is Rnil (no amount in the
statement of financial position for tax purposes since it has
already been claimed).
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