ACC 377 Lecture Notes - Lecture 2: Deferred Tax, Pay-As-You-Earn Tax
Quarterly - with two installments paid in year and two after. Thus creating liability
When CT has been over or under estimated, what adjustment do you make in the following year?
Take through P/L -
Dr P/L Taxation
Cr Bank
Dr Bank
Cr P/L Taxation
Exam tip - Often don't include bank but incorrectly debit/credit payable. Just Replace bank with payable.
When correcting PY Tax, don't forget to workout and Jr CY
...
If there is a tax loss and company makes claim
Dr Other Receivables
Cr P/L Taxation
What is income tax?
When a company pays bond, loan, royalties interest to an individual, they must deduct that persons tax
at source. Like PAYE.
What are the two main journals for for recording income tax?
Interest paid-
Dr P/L Finance Costs (gross)
Cr Bank (Net)
Cr Current tax payable (Tax withheld)
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IT Paid-
Dr Current Tax Payable
Cr Bank
Deferred Tax - Pension liability
Pension liability @ YE £300,000.
This means they will make a future contribution to meet liability. This contribution is tax deductible,
therefore entity should recognise asset!
(300,000x17%) 51,000
Dr Deferred Tax Asset
Cr P/L - taxation
Deferred Tax - Gained rolled over
£2m Taxable gain was rolled over to another asset. This gain isn't realised until 2 years down the line.
(2m x 17%) 340,000
Dr P/L Taxation
Cr Deferred Tax Liability
Temporary differences
Difference between carry amount in SoFP and tax base.
Taxable TD - Rolled over gain
Deductible TD - Pension Liability
Deductible Temporary Difference - Assets
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Document Summary
Quarterly - with two installments paid in year and two after. Exam tip - often don"t include bank but incorrectly debit/credit payable. When correcting py tax, don"t forget to workout and jr cy. If there is a tax loss and company makes claim. When a company pays bond, loan, royalties interest to an individual, they must deduct that persons tax at source. This means they will make a future contribution to meet liability. This contribution is tax deductible, therefore entity should recognise asset! (300,000x17%) 51,000. 2m taxable gain was rolled over to another asset. This gain isn"t realised until 2 years down the line. (2m x 17%) 340,000. Difference between carry amount in sofp and tax base. Twdv exceeds nbv, deductible td and deferred tax asset. Nbv exceed twdv, taxable td and deferred tax liability. Td exam tip - you may have to adjust for additions, dep, and capital allowances in exam.
