Example1

The net profit of ABC Firm amounted to L.E. 120,000 for the year ended on Dec. 31st, 2014. examining the firm’s books revealed the following:

There were sales made on 28th. Of December, received by the customers on the same date, with a value of L.E. 25,000 entered on the 8th of January,2015

Amongst the goods sent to commission – agents during the month of December with a value of L.E. 50,000 a  part was sold for the amount of L.E. 20,000 with agent’s commission thereon being 5% still due. But this transaction was not recorded during the financial year, and only the part remaining unsold was included in inventory.

Sales returns recorded during the year included sales returns at value of L.E. 5,000 were actually returned on 3rd. January of the New Year. It was also revealed that half of the goods which were sold for an amount of L.E. 6,000 were returned, but recording was affected for the amount of L.E. 3,100.

The partner withdraws goods for personal use, the costs of which were estimated at the amount of L.E. 4,000 which did not appear in the records.

Required: Illustrate the previous transaction effect on determining the tax base.

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