An Analysis of the Term Actually Incurred in Section 11(a) of Income Tax Action :: Accounting Education Finances Taxes Essays

An Analysis of the Term Actually Incurred in Section 11(a) of Income Tax ActionAct No. 58 of 19621.SYNOPSIS broadly speaking Accepted Accounting Practice includes statement AC000 Framework forthe preparation and infixation of financial statements. This sets out broadand definitive rules governing the actualisation of liabilities and income and economic consumption in financial statements. Specifically the following paragraphs needto be considered knowledge of liabilities91. A liability is recognised in the balance sheet when it is verisimilarthat an outflow of resources embodying economic benefits willresult from the settlement of a present obligation and the amountat which the settlement will take slip can be measured reliably...Recognition of expenses94. Expenses are recognised in the income statement when a falling off infuture economic benefits link up to a decrease in an asset oran increase of a liability has arisen that can be measuredreliably. This means in imprint th at recognition of expensesoccurs simultaneously with the recognition of an increaseor a decrease in assets95. Expenses are recognised in the income statement on the solid groundof a direct association between the costs incurred and the and theearning of specific items of income. This process, usuallyreferred to as the matching of costs with revenues, involves thesimultaneous or combined recognition of revenues and expenses thatresult directly and jointly from the same transaction or early(a)eventsThe fisc takes little notice of these rules when it comes to the recognition ofexpenditure for the purposes of taxation. It is the part of these rules thatgovern the full general deduction provision that this report will examine.Section 11(a) of the South African Income Tax Act No. 58 of 1962 (as amended)reads as follows11. General deductions allowed in the determination of taxable income.-For the purpose of determining the taxable income derived by any(prenominal)person from the carry ing on of any trade within the Republic, thereshall be allowed as deductions from the income of much(prenominal) person soderived-(a) expenditure and losings really incurred in the Republic in the drudgery of the income, provided such expenditure and lossesare not of a capital nature.The section defines the conditions that must be met for expenditure and lossesto be allowed as deductions from income. The expenditure or losses must havebeen ActussmentIn the Republic of South Africa.In the production of the income.Such expenditure or losses must not be of a capital nature.The section has to be read together with s23(g)23. Deductions not allowed in the determination of taxable income.-No deductions shall be made in respect of any moneys, claimedas a deduction from trade, to the extent to which such monies