Page 125 - Finac1 Test 1 slides

INCOME TAXES

Advances - example

• Revenue received in advance is not accounted in the statement of profit
or loss and other comprehensive income in the current year, but
disclosed as a liability in the statement of financial position

• debit – Bank;

• credit – Revenue received in advance

• The amount is taxable in the current year since all amounts received or
accrued are taxed according to the rules of the Income Tax Act.

• A company has been incorporated in the current year and has received
deposits in advance to the amount of R20 000 from their customers to
book holiday accommodation.

• The accounting profit of the company amounted to R150 000 for the
year ended 31 December 20.12 and the tax rate is 28%.

• Deferred tax is provided on all temporary differences according to the
statement of financial position approach. There is assurance beyond
reasonable doubt that there will be sufficient taxable profit in the future
to realise any tax benefits.

125