I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

liability company, however, is an expense in the statement of profit or loss, even when the manager is a 

shareholder in the company. Management salaries are included in administrative expenses. 

3.5 Finance cost 

This is interest payable during the period. Remember (from the previous chapter) that this may include 

accruals for interest payable on loan stock. 

3.6 Income tax expense 

This represents taxation as detailed in Section 3.7 below. Once again, this will include accruals for the 

tax due on the current year's profits. However, it may also include adjustments for any over- or under-

provision for prior periods (see example 3.7.1 below). 

3.7 Taxation 

Taxation affects both the statement of financial position and the statement of profit or loss. 

All companies pay some kind of corporate taxation on the profits they earn, which we will call income 

tax in line with the terminology in IAS 1, but which you may find called 'corporation tax'. The rate of 

income tax will vary from country to country. There may be variations in rate within individual countries 

for different types or size of company. 

Note that because a company has a separate legal personality, its tax is included in its accounts. An 

unincorporated business would not show personal income tax in its accounts, as it would not be a 

business expense but the personal affair of the proprietors. 

(a) The