Hi all, I've got a question refering to the tax in this question. Below the 2006 balance it is written 'The rate of corporation tax is 30%, but the company did not pay its tax during 2007'. Now if you look at the income statement in the Solutions, you see tax has value 4575 (30% of 15250). I was expecting a tax value of zero, since it is not paying tax during 2007. Does anybody know what is happening here? Thanks.
Hi Not got the particular question in front of me, but it sounds like the accruals principle: The income statement recognises the tax in the year to which it relates, regardless of whether or not the amount has been paid. If we were drawing up a cashflow statement, that would show zero tax paid for 2007. As it's not been paid, it will appear as a liability on the balance sheet at the end of 2007. Best of luck for tomorrow Lynn
