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Thread: Chart of accounts

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    Chart of accounts

    Hi, what is difference between 'Deferred Tax' , 'Receiver of Revenue' and Income tax payable accounts? expense acccounts? balance sheet?
    i have amounts for all three and am not sure what type of account to select. Options I have: Expense, Current Liability


    Is 'Retained Earnings' the same as 'Last year profit/loss'

    Any help will be much appreciated.

    Many Thanks

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    Deferred tax can either be an asset or liability and there must be a corresponding expense account. Your auditor will give you an entry annually whereby you either debit or credit the expense account and contra the asset / liability.

    Similarly for income tax, there is (usually) a liability account which is a contra for the annual income tax charge determined most probably by your auditor.

    So typically these are your entries:
    Dt Taxation charge - deferred R1000 (expense)
    Cr Deferred tax (R1000) (Non current liability)

    Dt Taxation charge - normal R15,000 (expense)
    Cr Income tax payable (15,000) (current liability)

    Is 'Retained Earnings' the same as 'Last year profit/loss'
    Yes, same thing

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    Quote Originally Posted by mtj View Post
    Is 'Retained Earnings' the same as 'Last year profit/loss'
    Not quite. By my understanding it's the cumulative value of undistributed earnings of the company over the lifetime of the business, not just the previous year's profit/loss.
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    You are very likely right. I am assuming "Last year profit/loss" is a balance sheet account, in other words retained earnings opening balance for the current year, but of course it may not be. And assumptions are the mother of all, erm, problems.

    Or, it may be, but just last year's movement, as its name suggests ... So I guess, mtj, you will have to look at what amount is actually held in that account, because it can basically be almost anything.

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