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Thread: Section 24c:Allowance for future expenditure

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    Question Section 24c:Allowance for future expenditure

    Hi there.I have done a search but could not find any reference related to 24c.Can any one tell me if the following interpretation of the act is correct.

    *The determination of the allowance will depend on the estimated profit margin of the contract*

    The total cost incurred will be posted to the income statement at every financial year end. A percentage will be calculated for the annual cost in comparrison to the total estimated cost or the contract. The same percentage will applied to the total estimated sales, and this amount will be carried to the income statement at year end.

    Should there be a surplus remaining for sales (in the balance sheet) after the income statement was credited, this amount will be fully taxable (Deffered Tax). However as the remaining sales do not reflect clear profit, a allowance for future cost applies.

    This allowance should not be greater than the sales less the estamed profit margin.

    The derrered taxation paid on the remaining sales balance less the 24c allowance will reflect as a tax credit in the following financial year.

    Roelof

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    Site Caretaker Dave A's Avatar
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    Would you mind if I moved this to the tax forum (it's more likely to be read by a tax expert who could comment), or is there a reason you'd prefer this to be in member only content?
    The trouble with opportunity is it normally comes dressed up as work.

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    No objections to move.
    Thank you.

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    Site Caretaker Dave A's Avatar
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    Done.

    I just wish I could answer your question. I've had to deal with deferred tax issues in two enterprises, but the circumstances under which deferred tax arose in both instances doesn't seem to match yours (there were no income statement entries, only balance sheet). And I wouldn't want to lead you astray.
    The trouble with opportunity is it normally comes dressed up as work.

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    Quote Originally Posted by Dave A View Post
    Done.

    I just wish I could answer your question. I've had to deal with deferred tax issues in two enterprises, but the circumstances under which deferred tax arose in both instances doesn't seem to match yours (there were no income statement entries, only balance sheet). And I wouldn't want to lead you astray.
    Hi Dave
    The credit balance on sales and the 24c allowance only refers to the balance sheet items.
    The income statement are dealt with in the normal way.Regards

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