ITAA Toelatingsexamen cheat sheet

Accounting equation: assets = liabilities + equity; every transaction preserves this equality, so each entry has equal debits and credits.

Double-entry rule: debit increases assets and expenses; credit increases liabilities, equity, and revenue. Contra accounts (e.g., accumulated depreciation) move opposite to their parent.

Accrual basis: revenue is recognized when earned and expenses when incurred, regardless of cash timing. Adjusting entries at period end cover accruals, deferrals, and depreciation.

Depreciation methods: straight-line = (cost − residual value) / useful life; declining balance = carrying amount × rate; units-of-production = (cost − residual)/total units × units used.

Inventory: under FIFO, ending inventory reflects the newest costs; under weighted average, unit cost = cost of goods available / units available. LIFO is not permitted under IFRS.

Lower of cost and net realizable value (IFRS) or lower of cost and market (US GAAP) governs inventory write-downs; reversals are allowed under IFRS, not under US GAAP.

Revenue recognition (IFRS 15) five steps: identify the contract, identify performance obligations, determine transaction price, allocate the price, recognize revenue on satisfaction of obligations.

Trial balance equality does not prove correctness: errors of principle, compensating errors, and complete omission of an entry leave the trial balance balanced.

Closing process: close revenue and expense accounts to profit or loss, then close profit or loss to retained earnings; temporary accounts start each period at zero.

Residence determines worldwide tax liability; source rules determine which country may tax a given item. Double taxation is relieved by exemption or by credit for foreign tax paid.

Taxable profit typically starts from accounting profit and adjusts for non-deductible items (e.g., fines, some entertainment costs) and exempt income, then applies losses and allowances.

Permanent differences never reverse (e.g., non-deductible penalties); temporary differences reverse over time and generate deferred tax assets or liabilities at the expected tax rate.

Deferred tax asset recognition requires probable future taxable profit; unrecognized assets are reassessed and recognized when recovery becomes probable.

Transfer pricing follows the arm's-length principle: transactions between related parties must be priced as comparable independent parties would agree (OECD methods include CUP, cost plus, resale minus, TNMM, profit split).

VAT is a multi-stage tax on value added: output tax minus input tax equals tax payable. Input tax is generally recoverable only when linked to taxable supplies; exempt supplies break the chain.

Capital gains regimes commonly tax disposal proceeds less acquisition cost and improvement costs, with reliefs for rollover, principal residence, or business asset transfers depending on jurisdiction.

Loss relief rules vary: trading losses may offset current-year profits, be carried back for a limited period, or be carried forward subject to continuity or ownership tests.

Anti-avoidance: general anti-abuse rules and specific rules (thin capitalization, controlled foreign companies, hybrid mismatch) override the legal form when the main purpose is a tax benefit.