Question 2

Amina & Khamis Co. ltd registered their business using Tanzania laws and commenced its business on 1 st
February 2002 as a retailer of mixed products in Morogoro Tanzania. The firm has prepared the following
draft accounts for the year ended 31st December 2017

Notes TZS “000” TZS “000”

Sales 1 770,000
Dividend 2 5,000
Interest income 3 12,000
Bad debts Recovery 4 5,000 792,000
Expenses
Salaries 320,000
Interest Expenses 5 70,000
Rent for the Business office 120,000
Legal and Professional fees 6 20,000
Contribution to the retirement 7 15,000
fund
Insurance 8 18,000
Depreciation 9 25,125
Mixed Expense 10 10,000 598,125
Profit for the Year 193,875

Addition notes:
1. All sales are on credit
2. Dividends are the result of the shares held by the partners bought from the Dar es Salaam Stock
Exchange. These were shares of TWCA Cement Company which distributed dividends during the
period.
3. Amina earned TZS. 8,000,000 as interest from its bank deposits and Khamis earned TZS.
4,000,000 from the amount deposited in ABC bank.
4. The amount received as a result of a business effort to collect debts from its receivables.

5. Interest paid to NSSF Pension Fund for late submission TZS. 20,000,000
Finance charge on loan facility not yet obtained TZS. 50,000,000
TZS. 70.000,000

6. Audit fees TZS. 10,000,000

Fee for filling an appeal at Tax Revenue Appeals Tribunal TZS. 10,000,000
TZS. 20,000,000

7. Employers’ contributions TZS. 15,000,000

8. Insurance costs are in respect of cars owned by Amina and Khamis equally for the year.
9. The depreciation amount was calculated from the two saloon cars used in business where at
December 2016 the written down value was TZS. 12,000,000 and also include a brand-new Prado
VX which has been imported in January 2017 for TZS. 30,000,000.
10. Mixed expenses included payment of TZS.2,500,000 and TZS.3,000,000 which have been used
by Amina and Khamis for their medical expenses, respectively, for the year. The balance was for
general consumables used by the business
REQUIRED:
Based on the information available, determine the taxable income for each partner for the year 2017.
 SOLUTION
Amina & Hamisi total taxable income adjustment as at 2017
  TZS “000” TZS “000”
Unadjusted Profit for the year   193,875
less: non business income included    
Dividend (5,000)  
interest from deposit (12,000) (17,000)
Sub total   176,875
add: disallowed expenses    
Depreciation 25,125  
partners salaries 320,000  
interest to NSSF 20,000  
Appeal fee 10,000  
insurance for private car 18,000  
partners medical expenses 5,500 398,625
Sub total   575,500
less: allowable expenses    
Depreciation (12,000,000 + 30,000,000)37.5%   (15,750)
Adjusted taxable income   559,750

Amina & Hamisi income appropriation

  TZS “000” TZS “000”
Taxable income   559,750
Less: Partners income    
salaries 320,000  
insurance 18,000  
medical expense 5,500 (343,500)
Distributable Income   216,250

DETERMINATION OF THE TAXABLE INCOME FOR EACH PARTNER

  AMINA HAMISI
TZS
  TZS "000" "000"
Distributable income 108,125 108,125
salaries 160,000 160,000
medical expenses 2,500 3,000
interest income 8,000 4,000
insurance 9,000 9,000
Taxable income 287,625 284,125