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Tutorial Set 2

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0% found this document useful (0 votes)
47 views5 pages

Tutorial Set 2

Uploaded by

djfiashide
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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UNIVERSITY OF GHANA

(All rights reserved)


UNIVERSITY OF GHANA BUSINESS SCHOOL
DEPARTMENT OF ACCOUNTING
ACCT 405: TAXATION
Tutorial Set 2
QUESTION 1
a) For an expenditure to be an allowable deduction, there must be a direct connection between
the expenditure and the business.
Required: Discuss this statement in line with the provisions of the Income Tax Act 2015 (Act
896).
b) According to Act 896, the Commissioner-General shall not allow a deduction in respect of
domestic expenditure and excluded expenditure incurred by a person.
Required: Explain what constitutes domestic expenditure and excluded expenditure in line with
the provisions in the Income Tax Act, 2015 (Act 896).
c) State the circumstances under which bad debt will be allowable.

QUESTION 2
Your company has recruited five new employees and the Director of Training has instructed
you to explain certain provisions in the Income Tax Act, 2015 (Act 896) to them:
Required:
As a tax trainee, explain the following provisions:
i) Research and development expenditure.
ii) Contribution and donations to worthwhile causes.
iii) Financial cost from derivatives.

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QUESTION 3
The following details were taken from the records of KK Company Limited for the 2020 year
of assessment.
GH¢
Profit before tax 132,000
The following were included in arriving at the net profit before tax:
GH¢
Total Financial Gain from derivatives 42,000
Total Financial Cost from derivatives 300,000
Required:
i) State what constitutes financial cost from derivatives.
ii) Explain the tax treatment of financial costs from derivatives under a company such as KK
Company Limited, which is neither a mining or petroleum company.
iii) Compute and explain the allowable financial cost from derivatives.
iv) Assume all facts are the same except that financial gain from the derivative is GH¢60,000
and Financial Cost from the derivative is GH¢30,000. Compute and explain the allowable
financial cost from the derivative.

QUESTION 4
a) The determination of a person’s tax liability is in relation to the concept of “Year of
Assessment” and “Basis Period.”
Required:
In relation to the statement above, distinguish between the concept of Year of Assessment and
Basis Period as used in income taxation.
b) State the Basis Periods for the following persons as provided in the Income Tax Act, 2015
(Act 896):
i) A sole proprietorship
ii) A company
iii) A trust
iv) A partner of a partnership

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c) Hajia Bintu has been in business from 1 September 2018, preparing accounts to 31 August
each year. She ceased to operate the business on 31 May 2023. The agreed profits for the past
years of operations are as follows:
GH¢
Year to 30/8/2019 18,000,000
Year to 30/8/2020 23,000,000
Year to 30/8/2021 28,000,000
Year to 30/8/2022 33,000,000
Period to 31/5/2023 50,000,000
Required
Calculate the assessable income for all relevant years.

QUESTION 5
a) With reference to the Income Tax Act, 2015 (Act 896):
i) State the general and residual deduction rules governing the ascertainment of a person’s income
from business and investment.
ii) With relevant examples, state the differences between capital expenditure and revenue
expenditure.
b) Agoo Ltd runs a business with a basis period from January to December each year. The
following information is relevant to its business operations for the 2022 year of assessment.
The Chargeable Income from business operations was GH¢480,000. The chargeable income was
arrived at after the following adjustments were made:
• The financial cost incurred on hedged transactions was GH¢1,800,000.
• Financial gain from hedge transactions was GH¢720,000
Required:
i) Compute the tax payable for the 2022 year of assessment.
ii) Advise management on the above results.

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QUESTION 6
a) Assume that the written-down value of assets in pool 2 is GH¢100,000, and the repairs and
improvements are GH¢20,000. What will be the tax-allowable expenses?
b) Kabutey Stores incurred expenses of GH¢ 2,500.00 on repairs and improvement of Plant
and Machinery and declared a profit of GHS 100,000.00 for the 2016 year of assessment.
NB: The Written value of the applicable pool before capitalizing any excess is GHS
60,000.00
Determine the following:
i) Allowable amount for repairs and improvement.
ii) Excess amount of repairs and improvements to be added to the depreciation basis of
the applicable pool.
c) Mawuena Ltd incurred expenses on repairs and improvement of GHS 6,500.00 on a Plant
and Machinery and also declared a profit of GHS 100,000.00 for the 2016 year of
assessment. NB: The Written value of the applicable pool before capitalizing any excess is
GHS 60,000.00
Determine the following:
i) Allowable amount for repairs and improvement
ii) Excess amount of repairs and improvements to be added to the depreciation basis of
the appropriate pool.
d) Sherry’s Ltd incurred expenses on repairs and improvement of GH₵ 6,100.00 on a Plant
and Machinery and declared a profit of GH₵ 150,000.00 for the 2022 year of assessment.
The written down value of the applicable pool before capitalizing any excess is GH₵
60,000.00. Based on this preamble,
You are required to determine:
i) Deductible amount for repairs and improvement.
ii) Excess amount of repairs and improvements to be added to the depreciation basis of
the appropriate pool.
iii) The adjusted profit.

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QUESTION 7
Nyanya Mining Ltd is a mining company incorporated in Ghana. In the 2019 year of assessment,
the company furnished the Ghana Revenue Authority with the following.
GH¢
Revenue 10,000,000
Cost 2,500,000
Gross Profit 7,500,000
Less operating expenses 8,100,000
Net Profit (600,000)
The following additional information is relevant:
i. Shika Ltd paid a dividend of GH¢50,000 to Nyanya Ltd, which was added to revenue.
Upon scrutiny, it was revealed that Nyanya Ltd has 25% shares in Shika Ltd.
ii. The operating expenses of GH¢8,100,000 include the following:
Filing Penalties GH¢1,000
Capital work in progress GH¢200,000
Depreciation GH¢100,000
iii. It was agreed with the Ghana Revenue Authority to grant a capital allowance of
GH¢300,000 for the 2019 year of assessment. The capital allowance is yet to be factored
into the computation of returns.
Required:
Compute the loss to be carried forward

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