QUESTION ONE (a) Describe the following principles of taxation: Simplicity. (2 marks) (i) Flexibility. (2 marks)...

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QUESTION ONE (a) Describe the following principles of taxation: Simplicity. (2 marks) (i) Flexibility. (2 marks) (iii) Productivity. (2 marks) (b) Propose four reasons for restricting imports in most developing countries. (4 marks) Taita Lad. is in trading business. The following income statement was obtained from the accounting records of the company for the year ended 31 December 2020: (c) Sh. Sales Foreign exchange gain Capital gain on sale of shares Dividends net of tax Interest from savings account Sh. 1,113,600 94,800 120,000 170,000 36,400 1,534,800 Less expenses: Purchases Legal expenses Donations Depreciation General expenses Cost of developing website Salaries and wages Bad debts 417,600 94,800 29,400 148,200 360,000 90,000 306,000 354,000 146,500 82,800 120,000 64,300 Proposed dividends NSSF contributions Purchase of furniture Bank ledger fees Net loss 2,213,600 (678,800) Additional information: 1. Sh. Legal expenses comprise: Renewal of 100 years lease • Defending a director from fraud charges • Registering a patent right Providing legal opinion on tender documents 28,000 24,800 36,200 Bad debts comprise: General provision for bad debts Specific provision for bad debts Bad debts written off SN00 94,800 Sh. 48,000 184,000 122,000 354,000 General expenses include; Cost of partitioning an offices space Sh.60,000, purchase of computer software 3. Sh.36,000, cost of wiring Sh.24,000 and conveyance fees Sh.48,000. Purchases and sales are inclusive of VAT at the rate of 16%. 4. Required: A statement of adjusted taxable profit or loss for the year ended 31 December 2020. (10 marks) (Total:20 marks) QUESTION ONE (a) Describe the following principles of taxation: Simplicity. (2 marks) (i) Flexibility. (2 marks) (iii) Productivity. (2 marks) (b) Propose four reasons for restricting imports in most developing countries. (4 marks) Taita Lad. is in trading business. The following income statement was obtained from the accounting records of the company for the year ended 31 December 2020: (c) Sh. Sales Foreign exchange gain Capital gain on sale of shares Dividends net of tax Interest from savings account Sh. 1,113,600 94,800 120,000 170,000 36,400 1,534,800 Less expenses: Purchases Legal expenses Donations Depreciation General expenses Cost of developing website Salaries and wages Bad debts 417,600 94,800 29,400 148,200 360,000 90,000 306,000 354,000 146,500 82,800 120,000 64,300 Proposed dividends NSSF contributions Purchase of furniture Bank ledger fees Net loss 2,213,600 (678,800) Additional information: 1. Sh. Legal expenses comprise: Renewal of 100 years lease • Defending a director from fraud charges • Registering a patent right Providing legal opinion on tender documents 28,000 24,800 36,200 Bad debts comprise: General provision for bad debts Specific provision for bad debts Bad debts written off SN00 94,800 Sh. 48,000 184,000 122,000 354,000 General expenses include; Cost of partitioning an offices space Sh.60,000, purchase of computer software 3. Sh.36,000, cost of wiring Sh.24,000 and conveyance fees Sh.48,000. Purchases and sales are inclusive of VAT at the rate of 16%. 4. Required: A statement of adjusted taxable profit or loss for the year ended 31 December 2020. (10 marks) (Total:20 marks)

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part a Simplicity the principle of simplicity in taxation means that the tax system should be as simple as possible This principle is based on the ide... View the full answer