Learning unit 5.pdf - Study unit 2 unit 5 Learning...

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2016/08/21 1 Study unit 2: Administration, returns and assessments Learning unit 5: Trading deductions and trading stock 2 Background Companies incur certain expenses in the running of the business Could be deductible from income Lowers taxable income The more tax deductions taxpayers can claim - reduces taxable income and less tax to be paid Deductions for tax and accounting purposes can differ in certain situations The act provides for a general deductible expenses, specific deductions and prohibited deductions 3 The general deduction formula (section 11(a) and section 23 (g) Section 11(a) Any person carrying on any trade shall be allowed deductions derived from: - Expenditure or losses - Actually incurred - During the year of assessment - In the production of income - Not of a capital nature. Section 23(g) prohibits the deduction of -Any money claimed as a deduction -To the extend which it was not laid or expended for trade purposes 4
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