Question

QUESTION 4 (20 MARKS) The following are THREE (3) independent situations occurring in the financial year ended 31 December 2019. A political donation is made by Beria Rima Berhad at the amount of RM40,000. Political donation is not allowed for tax purposes. Karisman Berhad recognizes development costs of RM50,000 as the research project has met the capitalization criteria. Amortization is made for the asset at the rate of 20% per annum. The development costs are allowed for taxation purpose at the time they are incurred. During the year, Normy Berhad recognizes interest receivables amounting to RM25,000 from the company's investment in government bonds. The interest from the tax-exempt government bond will be received in 2020, Required: For each of the situation above, identify taxable or deductible temporary differences for the year ended 31 December 2019. (6 marks) (CLOI:PLOI:C2)

Answer 1

Deductible temporary differences are those difference which will allow deduction in future when profit and loss account will be prepared.

Taxable temporary differences are those differences which will give taxable amount in the future.when profit and loss account will be prepared.

1) As political donation are not allowed for tax purpose hence there will be no temporary differences will be arise because no future benefit or obligation will rise.

2) As the development cost have been fully recorded in Profit and loss account whereas it has been amortised 20% every year in the books , hence less tax have been paid in the current year which will give taxable amount in the future . Therefore it is a Taxable temporary difference.

3) As the interest receivable is recorded fully during the year which is exempt but in 2020, therefore in 2020 it will be fully allowed for deduction hence it is a Deductible temporary difference.

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