ASSIGNMENT

Assignment



Assignment

Introduction

Taxation is now a major concern for businesses, for various reasons. First, the tax law is a constraint for the company that it requires compliance with important provisions in numbers, complex and rapidly evolving over time (Palepu & Healy, 2008, p.105). In addition, the legislature has provided mechanisms to control the application which is made of these rules and punish the errors identified in order to preserve the interest of the State, the tax creditor (Fraser & Ormiston, 2001, p. 128).

Discussion

Corporations could deduct the finished products or inputs used to produce or sell the assets that generate income. But changes in the law, corporations can now do so only until they sell the product, i.e., they can declare the "cost of sales" (Palepu & Healy, 2008, p.99; Fraser & Ormiston, 2001, p. 132). In the given case the company was facing higher payment for tax and less money available from profits. So, inclusion of depreciation expense will allows us to save money since depreciation on vehicles and furniture need to to be paid in cash until their disposal. The current scenario is presented in table below:Revenue

Jan

Feb

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

Totals

Flight Rate

£545.00

£504.00

£518

£848

£443

£494

£543

£589

£564

£497

£505

£483

£6,533.00

Hotel Rate

£180

£154

£170

£176

£190

£186

£167

£162

£154

£154

£120

£130

£1,943

Car Hire

£432

£432

£432

£432

£432

£432

£432

£432

£432

£432

£432

£432

£5,184

Bus/Rail

£4

£4

£4

£4

£4

£4

£4

£4

£4

£4

£4

£4

£48

Total Monthly Revenue

£1,161.00

£1,094.00

£1,124

£1,460

£1,069

£1,116

£1,146

£1,187

£1,154

£1,087

£1,061

£1,049

£13, 613

Cost of Goods Sold

 

 

 

 

 

 

 

 

 

 

 

 

 

Flight Rate

£560.00

£525.00

£535

£790

£560

£650

£650

£600

£585

£500

£542

£560

£7,057.00

Hotel Rate

£190

£200

£189

£259

£276

£230

£210

£250

£200

£260

£189

£180

£2,633

Car Hire

£450.00

£410.00

£380.00

£380.00

£380.00

£400.00

£380.00

£380.00

£380.00

£375.00

£380.00

£380.00

£4,675.00

Bus/ Rail

£10.00

£10.00

£10.00

£15.00

£15.00

£15.00

£15.00

£15.00

£10.00

£10.00

£10.00

£10.00

£145.00

Total Monthly Cost

£1,210

£1,145

£1,114

£1,444

£1,231

£1,295

£1,255

£1,245

£1,175

£1,145

£1,121

£1,130

£14,510

Gross Profits

£2,420

£2,290

£2, 228

£2,888

£2,462

£3,240

£2,510

£2,490

£2,350

£2,240

£2,242

£2,260

£27,392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Costs

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries

£3,145

£3, 145

£3, 145

£3, 145

£3, 145

£3, 145

£3, 145

£3, 145

£3, 145

£3, 145

£3, 145

£3, 145

£37,740

Insurance

£2,000

£2,000

£2,000

£2,000

£2,000

£2,000

£2,000

£2,000

£2,000

£2,000

£2,000

£2,000

£24,000

Intrest and Payment on Loan

£0

£0

£0

£0

£0

£0

£0

£0

£0

£0

£0

£0

£0

Total Fixed Cost

£7,545

£7, 545

£7, 545

£7, 545

£7, 545

£7, 545

£7, 545

£7, 545

£7, 545

£7, 545

£7, 545

£7, 545

£90, 540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable

 

 

 

 

 

 

 

 

 

 

 

 

 

Utilities

£150

£1,572

£1,572

£1,572

£1,572

£1,572

£1,572

£1,572

£1,572

£1,572

£1,572

£1,572

£17,442

Advertising

£100

£100

£100

£100

£100

£100

£100

£100

£100

£100

£100

£100

£1,200

Total Variable Costs

£1,672

£1,672

£1,672

£1,672

£1,672

£1,672

£1,672

£1,672

£1,672

£1,672

£1,672

£1,672

£20,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Monthly USAIR

£1,772

£1,772

£1,772

£1,772

£1,772

£1,772

£1,772

£1,772

£1,772

£1,772

£1,772

£1,772

£21,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit Before Taxes

£648

£458

£456

£1,116

£690

£1,468

£738

£718

£578

£468

£470

£448

£8,256

Depriciation

£1,000

£1,000

£1,000

£1,000

£1,000

£1,000

£1,000

£1,000

£1,000

£1,000

£1,000

£1,000

£1,000

New Profits

£1,648

£1,458

£1,456

£2,116

£1,690

£2,468

£1,738

£1,718

£1,578

£1,468

£1,470

£1,448

£9,256

Taxes

£369.00

£331.00

£330.60

£462.60

£377.40

£533.00

£387.00

£383.00

£355.00

£333.00

£333.40

£337.00

£4,532.00

Net Profit

£1,279.00

£1,127.00

£1,125.40

£1,653.40

£1,312.60

£1,935.00

£1,351.00

£1,335.00

£1,223.00

£1,135.00

£1,136.60

£1,111.00

£4,724.00

appendix

The above mentioned table shows that the company is making more money by paying non cash expense like depreciation. Subsequently, for making higher profit, salaries and other ...