Charles Whyte commenced business on May 1 2019, making up his accounts toSeptember 30 annually.The statement of the Profit or Loss Account for the first 17 months ended September30,2020 is as follows:Gross ProfitLess:Repairs and maintenance.Local transport and travellingSalaries and wagesProvision for bad debtsPreliminary expensesDepreciationBank interest and chargesLegal and professional chargesGeneral expenses (Allowable)Clearing expense on motor vehicleBad debtAmounts written offLoan to absconded employee(ii)(iii)(iv)(1) You are also given the following additional information.Bad debt£(v)£'00030/10/20181/1/20191/5/20191,5002,4506,5001,3509601,6301,5201,3801,8706852,800BuildingMotor VehicleFurniture and fittingsLegal and professional charges were:Salaries and wages:The following qualifying capital expenditures were acquired on:Fines for contravention of the lawLegal expenses for tax appealAudit and accountancy charges£'00019,30022,645(3,345)Senior staffJunior staff3 Charles Whyte's Children in higher institution1,850.000950.000£5,500,0003,800,0001,900,000Provision for bad debts was calculated as 5% of balance of trade debtorsas at September 30, 2020.£350,000185,000845,0001,380,000£3,500,0002,400,000600,0006,500,000a. Identify FIVE deduction not allowable for the purpose of ascertaining theincome of an individual for tax purposes.b. Compute the Adjusted Profit of Charles Whyte for the period ended.September 30,2020

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a. Identify FIVE deduction not allowable for the purpose of ascertaining the income of an individual for tax purposes. b. Compute the Adjusted Profit of Charles Whyte for the period ended. September 30,2020

a. Identify FIVE deduction not allowable for the purpose of ascertaining the income of an individual for tax purposes. b. Compute the Adjusted Profit of Charles Whyte for the period ended. September 30,2020

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Charles Whyte commenced business on May 1 2019, making up his accounts to
September 30 annually.
The statement of the Profit or Loss Account for the first 17 months ended September
30,2020 is as follows:
Gross Profit
Less:
Repairs and maintenance.
Local transport and travelling
Salaries and wages
Provision for bad debts
Preliminary expenses
Depreciation
Bank interest and charges
Legal and professional charges
General expenses (Allowable)
Clearing expense on motor vehicle
Bad debt
Amounts written off
Loan to absconded employee
(ii)
(iii)
(iv)
(1) You are also given the following additional information.
Bad debt
£
(v)
£'000
30/10/2018
1/1/2019
1/5/2019
1,500
2,450
6,500
1,350
960
1,630
1,520
1,380
1,870
685
2,800
Building
Motor Vehicle
Furniture and fittings
Legal and professional charges were:
Salaries and wages:
The following qualifying capital expenditures were acquired on:
Fines for contravention of the law
Legal expenses for tax appeal
Audit and accountancy charges
£'000
19,300
22,645
(3,345)
Senior staff
Junior staff
3 Charles Whyte's Children in higher institution
1,850.000
950.000
£
5,500,000
3,800,000
1,900,000
Provision for bad debts was calculated as 5% of balance of trade debtors
as at September 30, 2020.
£
350,000
185,000
845,000
1,380,000
£
3,500,000
2,400,000
600,000
6,500,000
a. Identify FIVE deduction not allowable for the purpose of ascertaining the
income of an individual for tax purposes.
b. Compute the Adjusted Profit of Charles Whyte for the period ended.
September 30,2020

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