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Flashcards in Current tax Deck (21):
1

The future tax obligation recorded in the current accounting period would thus appear as a _________ liability on the balance

The future tax obligation recorded in the current accounting period would thus appear as a non-current liability on the balance.

2

Incurring a loss in the current can be seen as giving rise to a ___________, namely the opportunity to reduce income tax liability in future accounting periods

 

Incurring a loss in the current can be seen as giving rise to a future tax benefit, namely the opportunity to reduce income tax liability in future accounting periods

3

Future tax benefit is accounted for in the current accounting period as a ____________. The  future benefit would thus appear as a __________ on the balance sheet. (future economic benefits)

Future tax benefit is accounted for in the current accounting period as a "deferred tax asset". The  future benefit would thus appear as a non-current asset on the balance sheet. (future economic benefits)

4

If an overall DTL is identified, then the pro forma journal entry will be as follows:

DR     _________         xx

CR     _________               xx

If an overall DTL is identified, then the pro forma journal entry will be as follows:

DR Tax expense  xx

CR Deferred tax liability xx

5

If an overall DTA is identified, then the pro forma journal entry will be as follows:

DR ___________xx

CR _____________ xx

If an overall DTA is identified, then the pro forma journal entry will be as follows:

DR Deferred tax asset xx

CR Tax revenue xx

6

The following items are never included in taxable income, but alwasys in accounting profit

  • Entertainment expenses
  • Statutory fines
  • Environmental carbon credits

7

The following items are never included in accounting profit, but must be included in taxable income for the current year

  • Deductible mining exploration increitve
  • Taxable franking credits

8

The following are not deductible for tax purposes: ___________

The following are not deductible for tax purposes: Goodwill write-downs

9

Bad debts are deductible for tax purposes only when accounts receivable are actually ____________

Bad debts are deductible for tax purposes only when accounts receivable are actually written off

10

The following are deductible for tax only when paid in cash: ___________

The following are deductible for tax only when paid in cash:

Insurance expense

Advertising expense

11

The following are assessed for tax only when cash is received: ___________________

The following are assessed for tax only when cash is received:

Interest revenue

Consulting revenue

12

What is " carrying amount"?

The carrying amount of a depreciable asset would be its written down, or "book" vaule (cost, or other value minus accumulated depreciation)

13

What is "tax base" ?

The tax base of an asset is the amount that will be deductible for tax purposes against any taxable economic benefits that will flow to an entity when it recovers teh carrying amount ofthe asset. It those, economic benefits will not be taxable, the tax base of the assest is equal to its carrying amount.

14

A deferred tax liability is simply the amount of tax that will be paid in the future as a result of taxable temporaty differences. The calcualation is as follows:

 

Deferred tax liability = taxable temporary differences x corporate rate

15

A deferred tax asset is simply the amount of tax that will be saved in the future as a result of deductible temporary difference. The calcualtion is as follows:

Deffered tax asset = deductible temporary differences x corporate tax rate

16

To illustrate, suppose an examination of individual assets and individual liabilities has resulted in an overall DTL of $4,000 and an overal DTA of $7,000. It cannot automatically be assumed that end of year dferred tax journal entries will therfore involve a $4,000 credit to DTL and a $7,000 debit to DTA. This is because DTL and DTA ledger accounts might have already been established in previous years, and might therefore have existing debit or credit balances attaching to them

For example, and using the target balances given above, if the DTL ledger account established in previous years has an existing credit balance of $12,000 and the current year target is a credit balance of $4,000, this would imply an end of current yer $8,000 debit adjustment to the DTL ledger account. The corresponding $8,000 credit adjustment would be to the Tax Revenue ledger account since "missing" credits needed to make a deferred tax journal entry balance will always be to Tax Revenue.

17

To illustrate, suppose an examination of individual assets and individual liabilities has resulted in an overall DTL of $4,000 and an overal DTA of $7,000. It cannot automatically be assumed that end of year dferred tax journal entries will therfore involve a $4,000 credit to DTL and a $7,000 debit to DTA. This is because DTL and DTA ledger accounts might have already been established in previous years, and might therefore have existing debit or credit balances attaching to them

If DTA ledger account established in previous years has an existing debit balance of $10,000 and the current year target is a debit balance of $7,000, this would imply an end of current yer $3,000 credit adjustment to the DTA ledger account. The corresponding $3,000 debit adjustment would be to the Tax Expense ledger account since "missing" debits needed to make a deferred tax journal entry balance wil always be to Tax Expense

18

There are four rules enabling identification of the type of temporary difference arising from individual assets or individual liabilities, and the associated deferred tax items involved:

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19

The tax base of an asset is to be calcualted as follows:

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20

The tax base of a liability is to be calculated in one of two ways depending on whether the liability does, or does not , represent revenue received in advance.

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21

The tax base of a liability is to be calculated in one of two ways depending on whether the liability does, or does not , represent revenue received in advance.

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