Corporate Accounting Individual Project: Tax Analysis, HI5020

This individual project report analyzes corporate accounting principles, particularly focusing on income tax. The report begins with an introduction to corporate accounting and the chosen company, Cape Range Ltd. The main body of the report explores key concepts such as accounting profit, taxable profit, temporary differences, deferred tax assets and liabilities, and recognition criteria. The report then delves into the firm's tax expense, comparing it to the company tax rate and explaining any discrepancies. It identifies and analyzes deferred tax assets/liabilities reported in the balance sheet and investigates current tax assets or income tax payable. The report further examines the relationship between income tax expense and income tax paid, discussing any differences. Temporary and permanent differences are explained, with any permanent differences for the company identified. The report concludes by reflecting on the treatment of tax in the firm's financial statements, highlighting interesting, confusing, surprising, or difficult aspects and any new insights gained. The project uses the financial statements of Cape Range Ltd to illustrate the application of these concepts.

Corporate Accounting Individual project

Table of Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
i. Briefly explain the concepts of accounting profit, taxable profit, temporary difference, taxable
temporary difference, deductible temporary difference, deferred tax assets and deferred tax liability. 3
ii. Briefly explain the recognition criteria of deferred tax assets and deferred tax liability.....................5
iii. What is your firm’s tax expense in its latest financial statements?....................................................5
iv. Is this figure the same as the company tax rate times your firm’s accounting income? Explain why
this is, or is not, the case for your firm highlighting the reasons for differences.....................................5
v. Identify the deferred tax assets/liabilities that are reported in the balance sheet articulating the
possible reasons why they have been recorded......................................................................................6
vi. Is there any current tax assets or income tax payable recorded by your company? Why is the
income tax payable not the same as income tax expense?.....................................................................6
vii. Is the income tax expense shown in the income statement same as the income tax paid shown in
the cash flow statement? If not, why is the difference?..........................................................................7
viii. Briefly explain the concepts of temporary difference and permanent difference. Identify any
permanent differences that your company may have.............................................................................8
ix. What do you find interesting, confusing, surprising or difficult to understand about the treatment
of tax in your firm’s financial statements? What new insights, if any, have you gained about how
companies account for income tax as a result of examining your firm’s tax expense in its accounts?....9
Conclusion.................................................................................................................................................10
REFERENCES..........................................................................................................................................11

INTRODUCTION
Corporate Accounting is a particular financial reporting subdivision which interacts with
financial reporting for firms, planning of their annual report and statement of cash flows,
evaluation and discussion of company financial performance and financial reporting for
particular events such as merger, uptake, and preparation of financial statements (Maas,
Schaltegger and Crutzen, 2016). The project report is based on a ASX listed company that is
CAPE RANGE LTD. Cape Range Limited (ACN 009 289 481) (Company or Cape Range) was
integrated as an unregistered limited company on 11 January 1988 and was originally mentioned
on the official version. Since the withdrawal of the corporation from the Official List on 24
March 2016, the Company has been researching a number of options with a perspective to
acquiring a business and/or income to allow the restructuring of the corporation and its re-entry
into the ASX. The project report covers detailed information about various kinds of concepts
such as accounting profit, taxable profit and many more. As well as report covers information
about deferred tax liabilities which are analyzed from prepared financial statement of chosen
company.
MAIN BODY
i. Briefly explain the concepts of accounting profit, taxable profit, temporary
difference, taxable temporary difference, deductible temporary difference,
deferred tax assets and deferred tax liability.
A public enterprise usually refers to an organization that can offer to the general public, typically
via an inventory bourse, its registration securities (stock, bond, etc.), but can also include
companies whose shares are being traded via an OTC (counter) via market managers who utilize
non-exchange citation services such as the OTCBB and Pink slabs (Atanasov and Black, 2016).
A government-owned business can even use the name "public entity." This sense of a "public
enterprise" is derived from and for the general public (public property) and from the less basic
usage in the United States of the public property ownership and preferences.
Accounting profit- Profit, when it comes to accounting, is the earnings allocated to the owner in
a profitable context of market manufacturing. Profit is an indicator of liquidity, which would be

the main interest of the proprietor in the stage of manufacture of the economy. There are a
number of profit measures in prevalent use.
Taxable Profit- Tax profit or taxable profit shall be used to differentiate between profitability
ratio and earnings. Taxable revenue is the money used to compute income tax. For a variety of
reasons, taxable profits may vary from financial performance and may be greater or lesser.
Temporary difference- The distinction between the carrying amount of the asset and the loss of
value in the income statement and its tax base is a provisional difference. A transient taxable
disparity is a transient discrepancy that may end in taxable sums in the future until the taxable
income or loss is calculated.
Taxable temporary difference- Temporary variations are discrepancies between the revenue
recognition laws and the tax accounting regulations that allow the pre-tax accounting income
applicable to tax to be higher or lower than the taxable profit during the same year and to be
lower or higher for the same percentage in subsequent periods.
Deductible temporary difference- A temporary deducible distinction will be a provisional change
in the total of taxable gains or losses that can be subtracted in long term (Allen, Ramanna and
Roychowdhury, 2018). The distinction between the carrying amount or the liability in the
income statement and its tax base is a provisional distinction. A deferred tax is recognized for all
deductible temporary differences if a taxable profit is likely to appear that will be offset against
coinsurance distinctions.
Deferred tax assets- Due to taxes paid or managed to carry forward, but not yet identified on the
statement of revenue, deferred tax assets are often established. For instance, deferred tax assets
can be developed as income or fees are recognized by tax authorities at times different from that
of the financial statement. The asset contributes to reducing the potential tax liabilities. It must
be noted that even where the discrepancy in a surplus benefit or a loss of the asset is to pay for
potential income is considered a deferred tax asset.
Deferred tax liability- Deferred tax liability is a tax which has, but has not yet been paid, been
evaluated or due for the current cycle. The postponement is based on the discrepancy between
both the period the tax is charged and the date the bill is collected. The amount of the taxation a

business has "underpaid"—which will ultimately be paid in the future — is a simple way of
defining the deferred tax liability. By claiming that they have been underplayed, it does not
necessarily mean that they do not fulfill their tax obligations, but instead that they know that they
are compensated on a separate timetable.
ii. Briefly explain the recognition criteria of deferred tax assets and deferred
tax liability.
Deferred tax assets- On the basis of prepared balance sheet of above company, this can be find
out that their deferred tax assets are of 10 and 17 million dollar for year 2018 and 2019.
Deferred tax liability- On the basis of prepared balance sheet of above company, this can be find
out that their deferred tax liabilities are of 460 and 410 million dollar for year 2018 and 2019.
iii. What is your firm’s tax expense in its latest financial statements?
Tax expense- The tax expense or tax expense of a corporation is the pre-tax income increased by
the suitable tax rate. Companies usually pay tax in line with accounting standards prior to
actually tax to their stockholder. Firms collect their government's income before tax under tax
law (Schaltegger, Burritt and Petersen, 2018). Besides the range of tax rates for various income
levels, the different taxes in each authority and the many levels of income tariff also contribute to
the complexity of defining the tax expenditure of an entity. The tax office such as the Internal
Revenue Service (IRS) and GAAP / IFRS shall carefully assess the appropriate tax rate and
define the required accounting practices for products that impact one's tax expenses.
Tax expenses of Cape Range limited:
On the basis of prepared financial statement of Cape Range limited, this can be stated that their
taxable expenses are of 7 and 8 million dollar for year 2018 and 2019.
iv. Is this figure the same as the company tax rate times your firm’s accounting
income? Explain why this is, or is not, the case for your firm highlighting the
reasons for differences.
On the basis of different financial statements, this can be stated that company tax rate is
different in balance sheet and income statement. Such as in the balance sheet, total taxable

expenses are of 7 and 8 million dollar. As well as under income statement, value of taxable
expenses is of 11 and 28 million dollar.
The reason of this variation is that their consideration of different items is various. Such as in
some aspects tax rate is considered as per the given information. While in some case tax rate is
considered as accountants’ perspective.
v. Identify the deferred tax assets/liabilities that are reported in the balance
sheet articulating the possible reasons why they have been recorded.
As per the recorded items in balance sheet and income statement, this can be stated that value of
deferred tax liability is of 460 and 410 million dollar for year 2018, 2019. On the basis of
prepared balance sheet of above company, this can be find out that their deferred tax assets are of
10 and 17 million dollar for year 2018 and 2019.
The reason for which deferred tax assets and liabilities are recorded in the accounts of a
company:
It is placed under non-current liabilities in the balance sheet. Deferred tax liability will be
documented by the company's balance sheet so that its stockholders are aware at the end of the
fiscal year and for audited, of all the underscoring liabilities (Agrawal and Cooper, 2017). A
company is subject to a deferred income tax liability in a number of instances. Consequently, it is
necessary to consider these situations and their effect on the financial statements of a business.
vi. Is there any current tax assets or income tax payable recorded by your
company? Why is the income tax payable not the same as income tax expense?
No, Cape range ltd. has not paid any income tax payable but it has paid income tax expense of worth
$54,215 even after loss to the company.
The income tax payable is not the same as income tax expense because Income tax payable is a kind of
record in the current liabilities section of an organization's balance sheet report. It is made up of
assessments due to the legislature within one year. The amount of annual fees payable is reflected in
the largest valuation law in the agency's home country. An annual assessment due is reflected as a
current obligation due to the settlement obligation within the following year. In any case, any part of the

annual liability due that has not been retained for a check within a subsequent year is called a risk of
withdrawal.
The payment of a personal cost is an essential component for assessing a company's eligible cost risk.
Eligible cost risk arises when it shows a difference between an organization's annual service obligation
and the cost of a personal assessment. The difference may be due to a model of when actual personal
appraisal is expected.1 For example, a company may have $ 1,000 in annual expenses when tested using
retention guidelines Books. However, if the agency asks for only $ 750 on the government's personal
form, after the deposit, the $ 250 difference becomes a liability in the future. The controversy occurs
because the normal differences between the Revenue Service (IRS) and the corporate accounting
guidelines (GAAP) are causing a delay in some responsibilities for the foreseeable future.
The cost of an assessment is a risk due to administrative, state / city governments or possibly a fixed
period of time, usually within a year.
Tax expenses are determined by doubling the actual amount of work of a person or commercial activity
from the wages received or deducted before the expenses, after consideration of non-deductible
factors, debit facilities and liabilities. Notwithstanding the level of duties associated with the different
levels of salary, the specific assessment levels in a number of properties and the different levels of
expenditure on wages are added to the unpredictability of e is to calculate the cost of an element.
Deciding on the appropriate valuation level and identifying the proper accounting techniques for factors
that affect your service cost are deliberately represented by debt experts, such as the Futures Service
input (IRS) and GAAP / IFRS.
Income tax expense "the thing you have established is that our organization has to pay according to the
usual rules of business accounting. Report this expense on the salary definition." Annual tax Payable is
"the actual amount your organization must pay, in accordance with the principles of the spending code.
vii. Is the income tax expense shown in the income statement same as the
income tax paid shown in the cash flow statement? If not, why is the
difference?
No, both are different in income statement and cash flow statement and difference of amount is also
huge; as in income statement the amount of tax expense shown is $54,125; whereas in cash flow
statement it is only $267.

According to SFAS 95, Cash Flow Statement, most business efforts are required to provide an income
request with all wage definitions, identifying income as working, adding or financing. SFAS 95 imposes
annual cost limits on organizations such as job increases, although some indemnities of personal liability
are identified with grant and funding exercises.
Across the world, the adjustment of personal expenses in the income statement changes. The
accounting gases of most countries comply with SFAS 95, but the United Kingdom - the Irish state -
indicates personal evaluation quotas in different classifications. The conventions of the Australian
Accounting Standards Board, the Canadian Accounting Standards Board and the International
Accounting Standards Board identify indemnities as personal expenses as operating expenses, except
where they may be specifically related to grant or funding exercises. Since the annual appraisal
allowances are income from subordinate employment within the meaning of SFAS 95, the net income
from work exercises (NCFO) includes the personal liability effects of certain increases and misfortunes
which characterize with subsidy or financing exercises, for example additions and misfortunes in the
removal of plant resources and the early elimination of liability. . All in all, personal appraisal allowances
should be spread across work exercises, grants and funding with the aim of making items of net income
for all activities that reflect income after the cost. This will improve the unequivocal quality of
profitability options and strengthen the experimental tests dependent on the database which subtracts
these subtitles directly from a call for distributed revenue.
viii. Briefly explain the concepts of temporary difference and permanent
difference. Identify any permanent differences that your company may have.
Temporary differences occur whenever there is a difference between the tax base and the carrying
amount of assets and liabilities on the balance sheet.
Permanent differences are differences between the tax and financial reporting of revenue or expense
items which will not be reversed in the future.
Temporary differences
The development of exclusive resources or liabilities provided by transgender differences could occur if
the differences are reversed sometimes not too far and to the extent that the accounting relationship
matters necessary to bring future financial benefits to the organization.

There are brief marginal differences in (i) taxable temporary differences, and (ii) deductible temporary
differences.
Permanent differences
Since they are not returned, perpetual disagreement does not offer resources or responsibilities with a
permitted burden. The causes of perpetual differences include:
 Salary or expense of things not allowed by the debit law, e
 Evaluation credits for some ideas that legitimately reduce costs.
Each lasting conflict will distinguish between a firm's strong appraisal level and that of the lawyer.
The permanent differences in the account of Cape range ltd. is difference between income tax expenses
in Income statement and cash flow statement which will not get reversed in future.
ix. What do you find interesting, confusing, surprising or difficult to
understand about the treatment of tax in your firm’s financial statements?
What new insights, if any, have you gained about how companies account for
income tax as a result of examining your firm’s tax expense in its accounts?
The confusing thing I found in the financial statements regarding treatment of tax is paying tax expenses
even after loss face by the company and the difficult thing to understand is difference between tax
expenses shown in income statement and cash flow statement. As it already stated that in case of cash
flow statement the difference arises due to considering only those taxes which is related to operational
activities but the surprising thing is that where does remaining tax expense gone and how it will be
treated in the account of cash flow statement and why this difference arises.
The new insights I found is paying tax expenses even after loss by company and the difference between
tax expenses in Income statement and cash flow statement.

Conclusion
From the above assignment it can be concluded that; deferred tax assets and liabilities are generally
estimated using the established expense rates and valuation laws. Be that as it may, some statements
about expense rates and customs laws by the legislator could have a significant impact on the actual set-
up. In these terms, the agreed utilities and responsibilities are considered using these evaluation and
service laws. Permitted cost resources and liabilities should not be limited to their present value. It is
necessary to mention that both the facility of the commission given and the discounted risk given for
temporary differences, so to speak. These differences are transient in nature and over time the effects
of these differences are eliminated. Moreover, given the accounting status of the tariffs issued, the
amount of the tariff issued cannot be limited to its present value. After that, while performing the
implemented damage estimate, the cash time estimate is not taken into account and, along these lines,
the design controversies are adjusted.
An organization needs to take separate quotas to stay in line with corporate guidelines. The company
accounting deals with this task, taking into account, for example, employee assessments, foreclosures
for allowances, allowances for retirement accounts, premiums for direct execution. as an allowance for
overtime. The corporate accounting books show that these indemnities are determined, managed and
paid by the corporate accounting office.

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