Income Taxes

Question 1

where does tax unpaid at the end of a period go

Answer 1

current liabilities

Question 2

journal transactions to introduce tax

Answer 2

DR income tax expense
CR income tax payable

Question 3

when are under or over provisions dealt with

Answer 3

following years tax charges

Question 4

how will an underprovision affect tax charge following year

Answer 4

increase charge

Question 5

how will an over provision affect tax charge following year

Answer 5

reduces charge

Question 6

what does substantively enacted mean

Answer 6

put through legislation that this will be the tax rate in effect

EG. Budget 2024 changes start 1 Jan 2024

Question 7

which part of the financial statements are effected by under and over estimates

Answer 7

only P/L

Question 8

what is deferred tax

Answer 8

there is a difference in profit for accounting purposes and tax purposes

eg depreciation vs capital allowances

deferred tax is used to reconcile the difference

Question 9

if income tax is on the debit side in trial balance is this an under or over provision

Answer 9

under provision -> will increase expense

Question 10

if income tax is on the credit side in trial balance is this an under or over provision

Answer 10

over provision -> will decrease expenses