Question
Question 1
Beverly (Pty) Ltd is one of your clients who operate a small fudge making business.
They provided you with the following details with regard to their 2020 year of
assessment: Note Amount Sales 600 000; Cost of sales 120 000; Telephone 1
168 000; Insurance 2 2 400; other expenses 3 145 000. Thokozani Fudge (Pty) Ltd
has a 31 December year end. Thokozani (Pty) Ltd is a VAT vendor and all amounts
provided exclude VAT.
Notes:
1. Beverly Fudge (Pty) Ltd entered into a contract with a new service provider with
regards to their telephone service. In terms of the contract they have unlimited minutes
for a 12 month period starting on 31 August 2020 for the all-inclusive amount of R148
000. This amount is included in the telephone expenses
2. Contract of insurance which was entered into on 1 April 2023 for coverage until 31
March 2024. 3. Valid tax deductible expenses.
REQUIRED TO:
Calculate the taxable income of Beverly Fudge (Pty) Ltd for the 2020 year of
assessment
Please show the section of the tax act of south africa
Beverly (Pty) Ltd is one of your clients who operate a small fudge making business.
They provided you with the following details with regard to their 2020 year of
assessment: Note Amount Sales 600 000; Cost of sales 120 000; Telephone 1
168 000; Insurance 2 2 400; other expenses 3 145 000. Thokozani Fudge (Pty) Ltd
has a 31 December year end. Thokozani (Pty) Ltd is a VAT vendor and all amounts
provided exclude VAT.
Notes:
1. Beverly Fudge (Pty) Ltd entered into a contract with a new service provider with
regards to their telephone service. In terms of the contract they have unlimited minutes
for a 12 month period starting on 31 August 2020 for the all-inclusive amount of R148
000. This amount is included in the telephone expenses
2. Contract of insurance which was entered into on 1 April 2023 for coverage until 31
March 2024. 3. Valid tax deductible expenses.
REQUIRED TO:
Calculate the taxable income of Beverly Fudge (Pty) Ltd for the 2020 year of
assessment
Please show the section of the tax act of south africa
Answers
GPT 3.5
According to Section 23 of the South African Income Tax Act, taxable income is determined by deducting expenses actually incurred in the production of the income from the gross income.
In the case of Beverly Fudge (Pty) Ltd, the calculation of taxable income for the 2020 year of assessment would be as follows:
Sales: R600,000
Cost of sales: R120,000
Telephone expenses (including the new contract): R168,000
Insurance (for the year): R2,400
Other expenses: R145,000
Total expenses: R168,000 (Telephone) + R2,400 (Insurance) + R145,000 (Other expenses) = R315,400
Taxable income: R600,000 (Sales) - R120,000 (Cost of sales) - R315,400 (Total expenses) = R164,600
Therefore, the taxable income of Beverly Fudge (Pty) Ltd for the 2020 year of assessment is R164,600.
In the case of Beverly Fudge (Pty) Ltd, the calculation of taxable income for the 2020 year of assessment would be as follows:
Sales: R600,000
Cost of sales: R120,000
Telephone expenses (including the new contract): R168,000
Insurance (for the year): R2,400
Other expenses: R145,000
Total expenses: R168,000 (Telephone) + R2,400 (Insurance) + R145,000 (Other expenses) = R315,400
Taxable income: R600,000 (Sales) - R120,000 (Cost of sales) - R315,400 (Total expenses) = R164,600
Therefore, the taxable income of Beverly Fudge (Pty) Ltd for the 2020 year of assessment is R164,600.