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Taxation: Dr. Maina N. Justus
Taxation: Dr. Maina N. Justus
Where the company derives incomes from other sources besides the principle income, then
such incomes belong to the company and can be taxed as an aggregate.
The same rules of ascertaining the taxable income of a sole trader and partnership
business will be applied.
However, attention will be paid to few areas like:
i. Salaries and allowances paid to directors are allowable expenses
ii.Transactions between the company and directors or shareholders are
treated as business expenses for tax purposes.
Sh'000' Sh'000'
Sales 41,200
Less cost of sales
Opening stock 9,000
Purchases 11,600
20,600
Closing stock (6,200) (14,400)
Gross profit 26,800
Other incomes
Gain on sales of equipment 260
Interest on savings account (gross) 90
Refund of VAT 210
Gain on foreign exchange transactions (realized) 260
Farming income (gross) 90
Rental income (gross) 86 996
Expenditure
Legal expenses 860
Goodwill imparement loss 56
Salaries and wages 4,100
Bad debts 1,200
Repsirs to rental properties 110
NSSF contributions 600
Advertising 1,300
Donation to trade associations 90
Depreciation 290
3. The directors had withdrawn goods costing sh. 700,000 (selling price sh.
740,000) for the persons. These goods have been included in both sales and
purchases for the year ended 31 December 2011.
4. Salaries and wages included::
Sh.
Directors Allowances 2,100,000
Staff Christmas gifts 900,000
Golden handshake to a retiring director 1,100,000
4,100,000
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