11.4 Explain the nature of the charge for corporation tax in the accounts of a limited company. Is it an expense, or is it something else entirely?

11.1 The following accounting information relates to Past Limited for the year to 30 June 20X3:
Trial balance at 30 June 20X3 £
£
Share capital 200,000 Freehold land and building at cost 350,500 - accumulated depreciation at 1 July 20X2 14,040 Plant and machinery at cost 185,000 - accumulated depreciation at 1 July 20X2 118,000 Stocks at 1 July 20X2 165,000 Purchases 205,000 Sales 702,000 Wages 254,440 Administrative expenses 44,500 Selling expenses 24,000 Establishment expenses 30,000 Debtors 50,000 Provision for doubtful debts at 1 July 20X2 2,500 Creditors 33,300 Bank balance 15,900 Profit and loss account 159,500 Debenture loan (10%)
100,000 Loan interest paid 5,000 £1,329,340 £1,329,340 Notes:
1. The stocks held at 30 June 20X3 are valued at £120,500.
2. Adjustments are required for the following accrued expenses:

(a) loan interest due of £5,000;

(b) rent of £8,000.
3. Administration expenses paid include a payment in advance of £1,200.
4. Depreciation is to be charged for the year at 10 per cent of the cost of plant and machinery and at 2 per cent of the cost of buildings. The cost of the freehold land was £200,000.
5. The provision for doubtful debts is to be adjusted to 15 per cent of the debts outstanding at the year end.
6. The directors have decided to recommend a dividend of 10 per cent on the ordinary shares.
Prepare a profit and loss account and balance sheet from this information.