Deferred Tax Worksheet
Figure 1: (Statement showing Deferred Tax Worksheet)
Source: (Created by Author)
Journal Entries Relating to Current and Deferred Tax Assets and Liabilities
Figure 2: (Statement showing Journal Entries)
Source: (Created by Author)
In the books of XYZ Ltd. |
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Journal Entries |
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Dr. |
Cr |
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Date |
Particulars |
Amount |
Amount |
|
01-07-2013 |
Equipment A/c. |
$8,00,000 |
||
Bank A/c. |
$8,00,000 |
|||
(Being equipment acquired for cash) |
||||
30-06-2014 |
Depreciation Expense A/c. |
$1,52,000 |
||
Accum. Dep. – Equipment A/c. |
$1,52,000 |
|||
(Being depreciation charged on equipment) |
||||
01-07-2014 |
Accum. Dep. – Equipment A/c. |
$1,52,000 |
||
Equipment A/c. |
$70,000 |
|||
Profit on Revaluation A/c. |
$82,000 |
|||
(Being Equipment revalued at fair value and profit on revaluation recorded) |
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30-06-2015 |
Profit on Revaluation A/c. |
$82,000 |
||
Asset Revaluation Reserve A/c. |
$82,000 |
|||
(Being the gain on revaluation transferred to asset revaluation reserve) |
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Deferred Tax Assets A/c. |
$24,600 |
|||
Income Tax Expense A/c. |
$24,600 |
|||
(Being deferred tax recorded for the asset revaluation) |
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Depreciation Expense A/c. |
$1,15,000 |
|||
Accum. Dep. – Equipment A/c. |
$1,15,000 |
|||
(Being depreciation charged on equipment) |
||||
Profit & Loss A/c. |
$1,15,000 |
|||
Depreciation Expense A/c. |
$1,15,000 |
|||
(Being depreciation expenses closed) |
||||
30-06-2016 |
Depreciation Expense A/c. |
$1,15,000 |
||
Accum. Dep. – Equipment A/c. |
$1,15,000 |
|||
(Being depreciation charged on equipment) |
||||
Accum. Dep. – Equipment A/c. |
$2,30,000 |
|||
Loss on Revaluation A/c. |
$1,00,000 |
|||
Equipment A/c. |
$3,30,000 |
|||
(Being Equipment revalued at fair value and loss on revaluation recorded) |
||||
Income Tax Expense A/c. |
$30,000 |
|||
Deferred Tax Liabilities A/c. |
$30,000 |
|||
(Being deferred tax recorded for the asset revaluation) |
||||
Profit & Loss A/c. |
$1,15,000 |
|||
Depreciation Expense A/c. |
$1,15,000 |
|||
(Being depreciation expenses closed) |
||||
Asset Revaluation Reserve A/c. |
$1,00,000 |
|||
Loss on Revaluation A/c. |
$1,00,000 |
|||
(Being the loss on revaluation transferred to asset revaluation reserve) |
||||
30-09-2016 |
Depreciation Expense A/c. |
$22,500 |
||
Accum. Dep. – Equipment A/c. |
$22,500 |
|||
(Being depreciation charged on equipment) |
||||
Accum. Dep. – Equipment A/c. |
$22,500 |
|||
Bank A/c. |
$3,90,000 |
|||
Equipment A/c. |
$4,00,000 |
|||
Profit on Sale of Asset A/c. |
$12,500 |
|||
(Being equipment sold on profit) |
Figure 3: (Table Showing Journal Entries)
Source: (Created by Author)
Figure 4: (Statement showing Revaluation Fain/Loss and Deferred Tax)
Source: (Created by Author)
The case study states that the accountant of Jacky ltd faces the following circumstances while preparing the financial accounts of the business. The situations which arises are explained below in details:
Supplies A/c Dr $3,50,000 |
To Account Payable A/c $3,50,000 |
As per the situation which is mentioned in the case, the management of Jacky ltd holds shares in the Bobsmith Ltd which is of the value of $ 8,00,000. This holding of shares are to be taken as investments which are made by Jacky ltd and the same will be shown in the balance sheet of Jacky ltd (Needles, Powers and Crosson 2013). The value of such holdings of Jacky Ltd falls before the financial statement is finalized and the value of the shareholdings of Jacky ltd in Bobsmith ltd falls from $ 8,00,000 to $ 4,50,000. The business will be incurring in an unrealized loss for the fall in the stock prices of the business (Macve 2015). The transaction which the business needs to pass in such a situation is given below:
Unrealized loss on Trading Stock A/c Dr $3,50,000 |
To Trading Securities A/c $3,50,000 |
As per the case which is given in the case study, Jacky ltd has a major debtor which has filed for bankruptcy from which the company will be receiving debt of $ 9,00,000 for which the business has made a provision of $ 4,50,000. The business needs to amend the financial statements of the business and record the loss which the business will be suffering as the debtor is unable to pay any debts and thus the same will be considered as bad debts of the company. The business will be passing the given below entry to write off the debt of the business
Provision for Bad Debt A/c Dr $9,00,000 |
To Account Receivable A/c $9,00,000 |
Reference
Benkedjouh, T., Medjaher, K., Zerhouni, N. and Rechak, S., 2013. Remaining useful life estimation based on nonlinear feature reduction and support vector regression. Engineering Applications of Artificial Intelligence, 26(7), pp.1751-1760.
Del Giudice, V., Manganelli, B. and De Paola, P., 2016, July. Depreciation methods for firm’s assets. In International Conference on Computational Science and Its Applications(pp. 214-227). Springer, Cham.
Edmonds, T.P., Edmonds, C.D., Tsay, B.Y. and Olds, P.R., 2016. Fundamental managerial accounting concepts. McGraw-Hill Education.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Hu, F., Percy, M. and Yao, D., 2015. Asset revaluations and earnings management: Evidence from Australian companies. Corporate Ownership and Control, 13(1), pp.930-939.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.
Needles, B.E., Powers, M. and Crosson, S.V., 2013. Principles of accounting. Cengage Learning.
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.
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