Income account-trusts laws and accounts, Financial Accounting

INCOME ACCOUNT

(a) Classification:

Income will be classified under appropriate headings:

  • Rents;
  • Interest on Government securities;
  • Dividends;
  • Interest on mortgages.

 

(b) Taxation:

Income should be stated gross i.e. before tax has been charged on it. Provision for the total liability to tax should be shown as a charge against total income. When income is received net of withholding tax, for accounting purposes the income is grossed by and tax is shown as a pre-payment.

(c) Accruals:

It is a golden rule that income is NOT provided for until received but expenditure is accrued. In the USA, both income and expenditure are accrued in accordance with Generally Accepted Accounting Principles.  In the UK, expenditure is accrued in accordance with the accruals concept, but income is recorded only when it is received. The Explanatory Forward Accounting Standards states that Kenyan Accounting Standards are intended for application to all financial statements issued by estates and trusts; the accrual assumption is recognised in Kenya Accounting Standard Number 1 as one of the fundamental accounting assumptions; hence, in Kenya, income should be accrued to the Balance Sheet date.

(d) Statutory apportionments:
Investments should be maintained at their probate value and where an apportionment to capital has been made, a transfer should be made to the estate capital account to restore the investment to probate value.

Posted Date: 12/15/2012 12:46:30 AM | Location : United States







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