Question

Suppose you work as an assistant accountant for an Accounting firm called Maan pty ltd, an accounting firm, firm has many clients. Firm is involved with many accounting functions such Bookkeeping, tax, BAS, GST and other requirements. One of their client Marry came to you after July 2015 to lodge her tax returns. Mary has provided you the following information. Read this information carefully and answer below tasks. You must answer all tasks to get satisfactory performance in this assessment activity.

Mary has advised you she runs a small tapware business from her home, which is not GST registered. Her ABN is 84 491 702 643.

Details were as follows:

Sales were       $58,000          

Costs were as follows:

Purchase                                             $28,000

Advertising                                          $5,500

Bank charge                                        $1,000

Telephone                                           $4,500

Stationery                                            $1,500

Speeding fine                                      $386

12-month business insurance payment on 1 March 2015

$2,400

Suzuki 300o C.C travelled for business 1800 kilometres

Mary’s TFN is 456 896 543. Mary has resided at Bass Hill for the past four years and would like all correspondence sent there. Her business address is the same as home address, 13 George St, Bass Hill NSW 2777

Mary advises that she owns 2,750 Coles share and received fully franked dividend as follows:

14/10/2014                 Franked Dividend $110                       Imputation credit $47

14/04/2015                 Franked Dividend $126                       Imputation credit $54

Mary sold Telstra (TLS) shares 29 June 2015: 3000 TLS shares @4 per share

Mary bought Telstra (TLS) shares 2^nd November 2011: 3000 TLS shares @3.40 per share                                                             

Interest received from ANZ bank       $2,300

Mary (DOB: 03/05/1977) is married to David. Mary works part time at Coles as night filler

During the work at Coles she has following expenditure:

Purchase working shoes                                 $120

Washing uniform 38 weeks

WHS training paid                                         $420

Tax agent fess                                                 $120

Donation to Salvation Army                            $50

   

You are engaged to prepare Mary’s tax return of 2014/15. You need to communicate with her and complete the following tasks for her case.

a)

Decide which tax documents are required to prepare Mary’s taxation. (1.1)

b)

There could be many legal changes in terms of recording and reporting. Which sources would you use to make sure Mary is legally complaint according to changes in tax laws and other updates? (1.2)

c)

Identify Mary’s assessable income and allowable deduction. You may use following table: (1.3)

Assessable Income	$ Amount

Allowable deduction	$Amount

d)

While collecting tax documents from Mary, there could be some discrepancies. What could be those discrepancies? What actions wold you take identifying and solve them?

Answer 1

Part (a):

Documents required to file small business return in schedule C are as following:

1. Profit and loss account statement.
2. Information to ascertain cost of goods sold.
3. Documents to support business expenses.
4. Documents and information for business assets and liabilities.

Part (b):

Mary being a sole proprietor shall file income tax return in form 1040. She must comply with the requirements of the form to prepare her tax return for a year. Disclosing correct and proper information in relation to the amount of revenue earned by her business and taking deductions for allowable expenditures to ascertain the assessable profit is a must.

Part (c):

Assessable income	Amount ($)
Sales	58000
Interest received from ANZ bank	2300
Capital gain	1800
Franked dividend
2014	110
2015	126
	62336

Allowable deduction	Amount ($)
Purchase	28000
Advertising	5500
Bank charge	1000
Telephone	4500
Stationery	1500
Speeding file not allowed	-
Insurance premium (Mar to Dec)	2000
Donation to Salvation army	50
	42550

Part (d):

There could be following discrepancies:

1. Incomes which should have been included might not have been recorded in the books.
2. Expenditures not allowed might have been included in the books of accounts.

The provisions of income tax shall be followed properly to identify the discrepancies and these shall be corrected to ascertain the assessable income of Mary.