Question

Q1. An authorized retirement fund was established according to the applicable law, the contributions to this fund is shared between the employer and employee, whereas contributions to the fund amounted to SR 30,000 and SR 50,000 paid by employer and employee respectively.

Q2. The tax return of a tax payer showed that taxable income was SR 100,000 and deductible expenses were SR 125,000 during the taxable year 2016.The tax payer in 2017 realized a tax base indicating net operating profit of SR50,000.

Required: how much net operating losses were in 2016 and how much deductible net operating losses were from 2017 tax base.

Answer 1

1. Particulars Debit Credit

Employer Contribution to Retirement fund a/c Dr SR30,000   

Employee Contribution to Retirement fund a/c Dr SR50,000

To Bank a/c SR 80,000

(Being Contribution by employer and employee to retirement fund)

2. Taxable Income means all incomes and is reduced by all expenses and deductions. therefore in 2016 taxable income is SR 1,00,000 is already adjusted by expenses so there were no loss in 2016, hence no question of deducction of loss in 2017.