Ruby Bhd a listed company that involves in manufacturing and distributing kitchenware in Malaysia. The carrying amount of the assets and liabilities for Ruby Bhd as at 31 December 2019 is presented below. Carrying amount RM Freehold land 500,000 Motor vehicle, net 40,000 Developmental cost 25,000 Trade receivables, net 60,000 Other receivables 20,000 Inventory 8,000 Cash 18,000 Long-term loan 88,000 Deferred tax liability, 1 January 2019 58,500 Trade and other payables 40,000 Penalty payable 3,500 Current tax liability 8,000 Additional information: The freehold land was revalued to RM700,000 on 31 December A motor vehicle was bought on 3 January 2017 at cost of RM100,000 with the useful life of five years. The capital allowance for the first year is 30% and the subsequent years is 20%. The developmental cost was allowed for tax purposes when the cost incurred in Other receivables include the current year interest receivable on a fixed deposit of RM5,000. Trade and other payables include an accrual for compensation of RM12,000 to be paid to employees after the financial year A penalty of RM3,500 was imposed by the government on the company in current financial year. Taxation was payable at 30% in 2018 and reduced to 25% in REQUIRED: Determine the tax base of the assets and liabilities and calculate the temporary difference as at 31 December 2019 for Ruby State whether the temporary difference is taxable or deductible. Calculate the amount of deferred tax asset or liability and tax expense on 31 December 2019 for Ruby Prepare the journal entries to record the income taxes for Ruby BhdDiscuss to what extend does deferred tax liability meet the definition of liability as set out in the 2018 Conceptual Framework
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Client 2: Ruby Bhd
Ruby Bhd a listed company that involves in manufacturing and distributing kitchenware in Malaysia. The carrying amount of the assets and liabilities for Ruby Bhd as at 31 December 2019 is presented below.
|
|
Carrying amount RM |
|
Freehold land |
500,000 |
|
Motor vehicle, net |
40,000 |
|
Developmental cost |
25,000 |
|
Trade receivables, net |
60,000 |
|
Other receivables |
20,000 |
|
Inventory |
8,000 |
|
Cash |
18,000 |
|
Long-term loan |
88,000 |
|
|
58,500 |
|
Trade and other payables |
40,000 |
|
Penalty payable |
3,500 |
|
Current tax liability |
8,000 |
Additional information:
- The freehold land was revalued to RM700,000 on 31 December
- A motor vehicle was bought on 3 January 2017 at cost of RM100,000 with the useful life of five years. The capital allowance for the first year is 30% and the subsequent years is 20%.
- The developmental cost was allowed for tax purposes when the cost incurred in
- Other receivables include the current year interest receivable on a fixed deposit of RM5,000.
- Trade and other payables include an accrual for compensation of RM12,000 to be paid to employees after the financial year
- A penalty of RM3,500 was imposed by the government on the company in current financial year.
Taxation was payable at 30% in 2018 and reduced to 25% in
REQUIRED:
- Determine the tax base of the assets and liabilities and calculate the temporary difference as at 31 December 2019 for Ruby State whether the temporary difference is taxable or deductible.
- Calculate the amount of
deferred tax asset or liability and tax expense on 31 December 2019 for Ruby - Prepare the
journal entries to record the income taxes for Ruby BhdDiscuss to what extend does deferred tax liability meet the definition of liability as set out in the 2018 Conceptual Framework
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