An Analysis of the Term Actually Incurred in Section 11(a) of Income Tax Action :: Accounting Education Finances Taxes Essays

An Analysis of the Term Actually Incurred in Section 11(a) of Income Tax ActionAct No. 58 of 19621.SYNOPSISGenerally Accepted Accounting workout includes statement AC000 Framework forthe preparation and presentation of financial statements. This sets out broadand definitive rules governing the credit rating of liabilities and income and phthisis in financial statements. Specifically the followers paragraphs needto be consideredRecognition of liabilities91. A liability is value in the balance sheet when it is probablethat an outflow of resources embodying economic benefits willresult from the blockage of a present obligation and the amountat which the settlement will take place can be measured reliably...Recognition of expenses94. Expenses are recognised in the income statement when a decrease infuture economic benefits related to a decrease in an asset oran increase of a liability has arisen that can be measuredreliably. This means in effect that recognition of expensesoccurs s imultaneously with the recognition of an increaseor a decrease in assets95. Expenses are recognised in the income statement on the basisof a direct association between the costs incurred and the and theearning of specific items of income. This process, commonlyreferred to as the unified of costs with revenues, involves thesimultaneous or combined recognition of revenues and expenses thatresult directly and jointly from the same transaction or othereventsThe fisc takes little notice of these rules when it comes to the recognition ofexpenditure for the purposes of taxation. It is the part of these rules thatgovern the general deduction provision that this report will examine.Section 11(a) of the South African Income Tax Act No. 58 of 1962 (as amended)reads as follows11. General deductions allowed in the determination of taxable income.-For the purpose of determining the taxable income derived by any(prenominal)person from the carrying on of any trade at bottom the Republic, theresh all be allowed as deductions from the income of such person soderived-(a) expenditure and losings actually incurred in the Republic in theproduction of the income, provided such expenditure and lossesare not of a capital nature.The section defines the conditions that must be met for expenditure and lossesto be allowed as deductions from income. The expenditure or losses must havebeen ActussmentIn the Republic of South Africa.In the production of the income.Such expenditure or losses must not be of a capital nature.The section has to be read together with s23(g)23. Deductions not allowed in the determination of taxable income.-No deductions shall be made in respect of any moneys, claimedas a deduction from trade, to the extent to which such monies