1. POR Ltd's accounting year ends on 31st March. The company made a loss of Rs 2,00,000 for the year ending 31.3 2007 For the years ending 31.3 2008 and 31.3.2009, it made profits of Rs 1,00,000 and Rs. 1,20,000 respectively it is assumed that the loss of a year can be carried forward for eight years and tax rate is 40%. By the end of 31.3.2007, the company feels that there will be sufficient n? taxable income in the future years again. which carry forward loss can be set of There is no difference between taxable income and accounting income except that the carry forward loss is allowed in the years ending 2008 and 2009 for tax purposes. Prepare a statement of Profit and Loss for the years ending 2007, 2008 and 2009 Statement of Profit and Loss 31.3.2007 31.3.2008 31.3.2009 Rs. Rs. Rs. 1,00,000 (2,00,000) 1,20,000 (8,000) 80,000 Profit (Loss) Less: Current tax Deferred tax Tax effect of timing differences originating during the year Tax effect of timing differences reversed/ adjusted during the year Profit (loss) after tax effect (40.000) 60.000 40.000 72.000 01. 20.000 10% Q.12. (a) At the end of the financial year ending on 31st December, 2008, a company finds that there are twentylaw suits outstanding which have not been settled till the date of approval of accounts by the Board of Directors. The possible outcome as estimated by the Board is as follows: Probability Loss (Rs.) In respect of five cases (Win) 100% Next ten cases (Win) 60% Lose (Low damages) 30% 1,20,000 Lose (High damages) 2.00,000 Remaining five cases Win 50% Lose (Low damages) 30% 1,00,000 Lose (High damages) 20% 2,10,000 Outcome of each case is to be taken as a separate entity. Ascertain the amount of contingent loss and the accounting treatment in respect thereof. (b) Z Ltd. presents the following information for the year ending 31.03.2008 and 31.03.2009 from which you are required to calculate the Deferred Tax Asset/Liability assuming tax rate of 30% and state how the same should be dealt with as per relevant accounting standard. 31.03.2008 31.03.2009 Rs. (lakhs) Rs. (lakhs) Depreciation as per books 4,010.10 4,023.54 Unabsorbed carry forward business loss and depreciation allowance 2,016.60 4,110.00 Disallowance under Section 43B of income tax Act, 1961 518.35 611.45 Deferred Revenue Expenses 4.88 Provision for Doubtful Debts 282.51 294.35 Z Ltd. had incurred a loss of Rs. 504 lakhs for the year ending 31.03.2009 before providing for Current Tax of Rs. 26.00 lakhs