Tutorial 11

Problem 1;

Accounting net profit 900,000

Add:

- Raw Material available;

at the customs should be included;
in the inventory, since it is owned;
by the firm (Not included in x) 20,000

- Salaries of the employers son;

(36,000-30,000) 6,000
(It was deducted because it exceeded;
salaries of other employees).

- Subsidies received in cash 3,000

- Subsidies received in-term of medical prices (FV price) 8,000

- Difference in the value of goods exchanged for the land

(The transaction should be FV) (25,000 20,000) 5,000

- Cost of financing and investment (shouldnt be exempted) 1,000

- Understated capital gain on sale;

(Check Capital gain calculations) 20,000

- Total Taxable Profits (2) 963,000

Deduct:

- Unrealized Profit (20,000-15,000);

(Sense we record good at cost if;
Goods were not sold) (5,000)

- Profits on sale of securities in the

Egyptian stock exchange; (5,000)

- Uncollected bad debts; not allowed as deduction (2,000)

- Firms social insurance (was included expenses already) --

- Total Deductions (1) (12,000)

- Adjusted Taxable Net Profit (1-2) 951,000

Special Exemption

- A) Profits of shares in Private Egyptians shareholding firms. (3,500)

- B) Interests of deposits with registered banks (15,000)
- Total Exemptions (18,500)
Total Taxable net revenue (951,000-18,500) 927,500
Deduct; family exemption (Not given) (6,500)
Total taxable net revenue 921,000

Calculations of capital gain:

For accounting purpose For tax purpose

Initial BV= 500,000 Initial BV= 500,000

Acc. Dep= 100,000 Acc. Dep = 120,00

End BV= 400,000 End BV = 380,000

Capital gain = 700,000-400,000 = 300,000 Capital Gain = 700,000-380,000= 320,000

He added 300,000 only, however, 320,000 should be added, thus, we add 20,000 as understated capital
gains (Should be added to accounting net profit).