Examination Timing: 00H02M26S
A private limited company has an accounting period from 1 April to 31 March. For the accounting period, it has trading receipts of £750,000. It has made a gain from the sale of a piece of land of £25,000. It has spent £35,000 on raw materials, £345,000 on wages, and £3,500 on general production costs.
What is the company's taxable profit for corporation tax purposes?
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To determine the company's taxable profit for corporation tax purposes, we calculate the total income and then subtract allowable expenses. The trading receipts are £750,000 and the gain from the sale of land is £25,000, giving a total income of £775,000. The allowable expenses are raw materials (£35,000), wages (£345,000), and general production costs (£3,500), totalling £383,500. Subtracting the expenses from the income: £775,000 - £383,500 = £391,500.
Key Point: The taxable profit for corporation tax purposes is calculated by summing the total income and subtracting allowable expenses.
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