Illustration of Deffered Tax
A firm bought an item of plant at a total amount of £50,000. During the first year, the firm provided for depreciation of 10,000. The item of plant has a capital allowance of`£15,000 for the first year.Compute the carrying amount of the asset, the tax base and hence the temporary difference.
Carrying amount cost – depreciation
Tax base cost – capital allowance
Temporary differences carrying amount – tax base