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The financial statements of single entities

When the liability is finally agreed with the tax authority there may be a difference
between the accrual and the amount actually paid to settle the liability. Any difference
between the accrual and the amount paid is adjusted in the following year financial
statements. The effect of this is as follows:
Statement of financial position $
Tax payable (current year estimate only) X

Statement of profit or loss $
This year’s current tax estimate X
under/(over) provision from previous year X/(X)
Tax expense X

Illustrations and further practice

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