HKICPA QP Module 9 Principles of Taxation cheat sheet

Hong Kong taxation: source, category, base and the applicable comparison

• Identify the tax, source, person and year.

• Deductions and allowances affect different bases.

• Use the applicable two-tier standard-rate comparison.

• A cross-border concession or transaction rate needs its actual conditions.

• Cost of sales includes carriage inwards and excludes carriage outwards

• Closing inventory affects both the trading account and the balance sheet

• Drawings reduce capital and are never an expense

• An increase in the doubtful debts provision is charged to profit and loss

• Capital = opening capital + net profit − drawings

• Issued capital and actual cash received are different concepts.

• Share premium in the supplied par-value model is not sales revenue.

• Distinguish equity distributions from interest on liabilities.

• Prime cost includes direct materials consumed, direct labour and direct expenses

• Cost of production adds production overheads and adjusts for work in progress

• Selling and administration costs are not production costs

• Inventory is valued at the lower of cost and net realisable value