ACB21103 TAXATION 1

TUTORIAL : BUSINESS INCOME

QUESTION 1

Naim operates the business of kids wear at a shop lot. The Profit & Loss account
for the year ended 31 December 2022 is as follows:

RM RM
Sales 200,500
Less: Cost of goods sold 70,250 130,250
Other income:
Rental 12,000
Expenditure:
Staff salaries 46,660
Salary to proprietor 22,000
Shop rental 28,000
Utilities 4,000
Depreciation 8,080
Transportation 7,500
Entertainment for suppliers 2,040 (118,280)
NET PROFIT 23,970

Notes:
• The capital allowance for the year of assessment 2022 amounted to RM15,000.
• Naim hired two handicapped employees with a salary of RM900 each per
month.
• Adjusted business losses brought forward from previous years were RM5,000.

Determine the aggregate income for the YA 2022 for Naim.

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QUESTION 2

Mastura runs a fast-food outlet in Kuala Terengganu. The outlet’s statement of

profit and loss for the year ended 31 August 2022 is as follows:

Sales 80,000
Less: Cost of sales (25,000)
Gross profit 55,000
Less: Expenditure
Staff salaries 9,000
Salary to proprietor 2,000
Medical expense for parents 5,000
Rental (business premises) 6,000
Utilities 4,000
Entertainment for suppliers 3,400
General provision for doubtful debts 2,000
Leave passage 2,500
Approved donation 1,300 (35,200)
19,800
Add: Other income
Dividend 900
Adjusted Rental 1,500 2,400
Net profit before tax 17,400

Other information:
(1) Some of the office equipment was disposed of during the year
incurring a balancing charge of RM3,500.

(2) The claim for capital allowances for the year is RM6,000.

Required:

Based on the above information, determine the total income of Mastura for the
year of assessment 2022.

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QUESTION 3

Encik Helmi owns a catering business, Helmi Dagang Enterprise, located in a small
town in Kuala Terengganu. It has been in business for five years with three full
time workers.

For the financial year ended 31 December 2022, the Profit and Loss Statement of
Helmi Dagang Enterprise showed the following results:

Helmi Dagang Enterprise

Profit and Loss Statement for the year ended 31 December 2022
Note RM RM
Sales 3,200,100
Less: Cost of goods sold 1 1,130,000
Gross profit 2,070,100

Add: Other income 2

Dividend 15,000
Rental income 48,000 63,000
2,133,100
Less: Expenses
Entertainment and promotion 3 19,000
Bad debts 4 22,000
Professional fees 5 7,500
Donations 6 7,500
Fire insurance 5,200
Repairs and maintenance 7 20,500
Salaries and wages 8 335,000 (416,700)
Net profit before tax 1,716,100

Notes to the accounts for the year ended 31 December 2022:

1. Included in the cost of goods sold are the following charges:

Particulars RM
Depreciation of plant, property, and equipment 45,000
Withdrawal of stock for personal use:
- Cost of stock 3,700
- Market price of stock 4,900

2. Other income – Encik Helmi received a dividend of RM15,000 during the year
from his personal saving in Tabung Haji. The rental is from a shop lot in Kuala
Terengganu acquired for investment purposes. In 2022, the company spent
an amount of RM13,200 to install air-conditioner and another RM600 for quit
rent for the shop lot.

3. Encik Helmi spent RM7,000 to advertise his company in Molek FM radio

station and spent another RM12,000 to introduce his new menu to his
potential clients in a soft-launched event.
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 4. Bad debts account consists of the following:
Particulars RM
General provision 15,000
Bad debts written off 7,000

5. Professional fees consist of the following:

Particulars RM
Cost for accounting works and preparing the tax statement 3,500
Hiring Chef One to present at the soft-launched event 4,000

6. Donations consist of the following:

Particulars RM
Sponsored UniSZA students’ activity “Tax Day 2022" 1,500
Sponsored packed food for flood victims 6,000

7. Repairs and maintenance

Particulars RM
Repair and maintenance of vans and trucks used for 14,500
transporting food and equipment
Replacing plates, glasses, spoons and forks missing during 6,000
events

8. Salaries and Wages – En Helmi received a salary of RM12,000 per month as

the Managing Director of the company. A monthly salary of RM1,500 is paid
to each of his employees. During the year, the company contribute
RM36,000 to the approved EPF for Encik Helmi and paid one month bonus
to each of the employees. The balance was paid to part time workers and
overtime for full time workers.

9. Capital allowance for the year of assessment 2022 was RM42,500.

Required:

Compute the tax liability of Helmi Dagang Enterprise for the year of assessment
2022.

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QUESTION 4

Fakhri is a senior lecturer at Terengganu Institute of Technology (TIT) with a

monthly salary of RM15,000 and a housing allowance of RM700 a month.

Two years ago, when he reached 55 years old, he withdrew some of his EPF and
started his grocery store, MyGrocer. The store is managed by his elder son. The
following is the Statement of Comprehensive Income for MyGrocer for the year
ended 31 December 2022.

MyGrocer
Statement of Comprehensive Income for the year ended 31 December 2022

Note RM RM
Sales 383,000
Less: Cost of goods sold 1 175,000
Gross Profit 208,000

Add: Other Income

Dividend 5,000
Interest 2 8,400
Rental (Gross) 3 30,000 43,400
251,400
Less: Operating Expenses
Remuneration 4 54,000
Entertainment 5 14,800
Donation 6 5,800
Building rental 7 36,000
Repair and Maintenance 8 9,200
Utilities 9 8,500
Bad Debts 10 11,100
Depreciation 35,600 175,000
Profit before tax 76,400

Notes:

1. Included in the cost of goods sold was as follows:

i) Goods taken by Dr. Fakhri for his own purpose costing RM7,300. The
market value of these goods was RM8,600.
ii) Stock obsolescence amounted to RM3,300

2. Interest was received from money deposited in Lembaga Tabung Haji

Malaysia.

3. Rental income was received from renting out his own apartment in Kuala
Terengganu.

4. The company contributes 1.75% of the employee’s remuneration towards

employee’s SOCSO during the year.

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5. Entertainment
Family Gathering (Dr. Fakhri’s family) RM13,800
Wedding gift for one of his employee RM1,000

6. Donation comprises:
i) Rice to flood victims within his neighbourhood areas.
ii) Cash donation amounted to RM3,800 to an approved old folk’s home.

7. The business operates in a rented double-storey shop house. Dr. Fakhri’s son,
who is the manager of MyGrocer, occupies the second floor with his family.
It has agreed by IRB that one third (1/3) of the total rental paid was for
second floor.

8. Repair and maintenance include:

i) Installation of moveable partition for the shop amounted to RM4,725.
ii) Repairs of leaking piping of his rental apartment in Note 3 for RM550

9. It was agreed by IRB that three quarter (3/4) of the utilities expenses is for
business purposes.

10. Bad debts:

General Provision RM7,000
Specific Provision RM2,000
Bad debts written off RM2,100

11. Dr. Fakhri paid business zakat for that year amounting RM5,000.

12. Capital allowances for the year is RM25,300.

13. Dr. Fakhri’s wife is not working. They have two other children studying in
local universities.

Required:

Compute the total business income for Dr. Fakhri for the year of assessment 2022.

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QUESTION 5

Puan Solehah previously worked as a teacher at kindergarten since 2017. Due to

her interest in cooking, she resigned from her employment on 31 December 2021.
She received a bonus of RM4,500 from her employment on 15 January 2022. On 1
January 2022, she begins her catering business, SEDAP Enterprise.

The statement of profit and loss of the business for the year ended 31 December
2022 is as follows:

SEDAP ENTERPRISE
Statement of Profit and Loss for the year ended 31 December 2022
Notes RM RM

Sales 273,500
Less: cost of sales 1 150,285
Gross profit 123,215

Add: other income

Rental income 8,400
Interest income 2 1,680 10,080
133,295
Less: Operating expenses
Advertising expenses 9,600
Employee remuneration 15,600
Travelling expenses 3 3,310
Rent 1,760
Miscellaneous expenses 2,640
Utilities 4 1,800
Employees EPF 3,500
Repair and maintenance 5 10,200
Lease rental 6 7,680
Donation 7 23,500
Bad debt 8 7,200 86,790
NET PROFIT 46,505

Notes to the account:

1. Cost of sales includes depreciation amounting to RM1,200.

2. Interest income was received from money deposited in Amanah Saham

Bumiputera.

3. Travelling expenses includes leave passage of RM1,890.

4. It was agreed by IRB that 60% of the utilities expenses is for business
purposes.

5. Repair and maintenance include cost of renovation business premises

amounted to RM5,000.
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6. Lease rental is for the van that was used to deliver the customer order.

7. Donation consist of:

100 bottles of mineral water and 60kg rice was made RM15,000
to flood victims.
Cash donation to an approved Rumah Anak Yatim RM8,500
Bahagia.

8. Bad debts consist of:

General Provision RM5,000

Specific Provision RM2,200

9. Puan Solehah paid business zakat for that year amounting to RM2,500.

10. Capital expenditure incurred during the year were as follows:

Date Expenditure Amount

1/4/2022 Moulding machine RM4,800
1/11/2022 Car* RM75,000

*the car was registered as a passenger vehicle and acquired under a hire
purchase scheme and the relevant details are as follows:

Cost RM75,000
Deposit paid on 1 November 2022 RM8,000
Hire purchase amount (included interest of RM120,780
RM12,780)
Term of repayment 72 months
First instalment commences on 1 November 2022

Required:

Compute the total income for Puan Solehah for the year of assessment 2022.