Accounting Online Program Certification Practice Test

What will be the tax expense reported in the company's statement of profit or loss for the year ending 31 March 20X4?

1. £25,000

2. £26,700

3. £19,500

4. £21,200

The correct answer is: £25,000

To determine the correct tax expense reported in the company's statement of profit or loss for the year ending 31 March 20X4, it is essential to consider how tax expenses are calculated based on the company's taxable income and the applicable tax rate. The tax expense is derived from the company's revenues minus its allowable expenses, which leads to taxable income. The tax rate is then applied to this taxable income to ascertain the total tax liability for the period. If the company has any deductions, credits, or prior-year adjustments, they must be factored into the calculation of the tax expense as well. The figure of £25,000 signifies that after all calculations, including adjustments for any previous losses or credits and considering the stipulated tax rate, the final computed tax expense for the reporting period arrives at this amount. This amount reflects the obligation the company expects to return to the tax authorities for that financial year, providing insight into the company's tax planning and financial health. The other amounts listed reflect calculations that may have included erroneous assumptions or miscalculations regarding taxable income, tax rates, or adjustments, thereby not aligning with the accurate determination of tax expense for the specified period. Understanding this process is crucial in accounting for tax expenses correctly, which in turn affects net income