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Question 2
Accountancy
Can you please let me know how the statement of PL looks like? Tax Expense for each year should be equal to the tax on the accounting income, right? Accounting Income on the 2nd and the 3rd year will be Rs 52000 and 57000 ( 15000*35% and 150000*38%). Current Tax and Deferred Tax in the 2nd and the 3rd Year adds to Rs 57500 and 62500. Even if the flat 40% is applied, it will be Rs 60000 in each year. Current Tax+Deferred Tax will not equal to Rs 60K as Tax Expense. This is for the question 2 of AS 22- Taxes on Income. Question is If in Illustration 1, the substantively enacted tax rates for 2011, 2012 and 2013 are 40%, 35% and 38% respectively, how will be the amount of deferred tax liability computed.. Illustration 1 is below- FY ending every year 31st March 1.04.2001: Purchase of machinery Rs 150,000 Useful life 3 years Expected scrap value Zero IT depreciation 100% - year 1 Accounting depreciation SLM Profit before depreciation and taxes (each year) Rs 200,000 Corporate tax rate 40% Video Details ------------- P1 - Accounting Standards - CA Inter AS 22 #8. Illustration - II
Answers (1)
Firstly, Tax expense is not necessarily equal to Tax rate x Accounting income. The reason is that some differences are permanent. Also for other differences the tax rates might be different in earlier year- so when we account in current year for differences, the effective rate would be different.
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