The draft financial statements for Impact Sdn Bhd for the year ended 31 March 2021 included the following:

RM'000

Statement of comprehensive income (extract)

Tax expense for year ended 31 March 2021 1550

Notes to the accounts:

Under provision for 31 March 2020 100

Estimate of income tax for 31 March 2021 1200

Increase in deferred tax provision for 31 March 2021 350

1650

Statement of cash flows (extract)

Tax paid in the year to 31 March 2021 900

Required:

1. Explain how the under provision of RM100,000 in the income statement arose.

2. In accordance with MFRS112 1ncome Taxes, deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences. Explain what is meant by temporary differences and how deferred tax arises.