EPPA3023: TAXATION I

TUTORIAL 6: TAX ON SOLE PROPRIETORSHIP BUSINESS

QUESTION 1

Mr David, a sole trader, has the following sources of income and expenses for the year ended 31 December
2023.

Other Income RM
Dividend from UEP (M) Bhd. 4,500
Shop rental (RM3,000 per month) 36,000

The business profit and loss accounts for the year ended 31 December 2023 are as follows:

RM RM
Income
Flower sale 30,000
Sales of fertilizers and seeds 5,800
35,800
Expenses
Employee salary 3,000
Shop rental 1,200
Entertainment to suppliers 300
Depreciation of the cash register machine 600
Repair (including RM400 related to the purchase of chairs for shop use) 1,100
Repayment of bank loans for business capital (RM600 is interest) 3,200
The cost of buying flowers, fertilizers and seeds 10,000
(19,400)
Net income 16,400

Mr David’s business qualifying capital allowance for the year of assessment 2023 is RM400, and the
unabsorbed business loss from 2022 is RM1,000.

Required:
Calculate Mr David’s aggregate income for the year of assessment 2023.
 QUESTION 2

MaiShop is a sole proprietorship owned by Maisara. The following is information on the comprehensive
income statement for the year ended 31 December 2023:

Note RM RM
Sales 320,000
Less: the cost of goods sold (103,000)
217,000
Add: Other income
Rental 1 10,000
Profit from the sale of fixed assets 7,000
Commission 2 15,500 32,500
249,500
Less: Expenses
Salary and EPF 3 48,800
Bad debts 4 1,200
Rental 5 18,000
Water and electricity 6 1,200
Fines and penalties 7 900
Entertainment 8 2,000
Repair and maintenance 9 2,300
Insurance 10 9,700
Donation 11 4,500
Rental lease 12 24,000
Depreciation 13 6,000 (118,600)
Net profit 130,900

Note:

1. The rent received is from a house owned by Maisara in Machang.

2. The commission received is a gift from one of the distributors as a remuneration for achieving high
sales revenue in 2023.

3. Salaries and EPFs consist of:

Salary EPF
RM RM
Maisara - owner 18,000 2,000
Razlan - employee 15,600 3,300
Siti (OKU) 8,000 1,900

4. Bad debts consist of:

RM
Bad debts written off 300
Razlan’s bad debts written off 200
General provisions of doubtful debt 350
Specific provisions of doubtful debt 350
1,200
5. 70% of the rental payment is for shop buildings, while Maisara’s sister uses the rest.

6. Only 70% of the water and electricity bill payments are related to business use.

7. RM500 of the fines and penalties are the payment of a traffic summons made by one of the Maisara
employees while performing official duties, while the rest is a fine due to the delay in renewing the
business license.

8. 75% of the entertainment expenses are food and drink in conjunction with launching the new
product, and the rest is spent celebrating Maisara employees.

9. A total of RM2,000 was spent on renovating the business building for the comfort of disabled
workers, while the rest was spent on repairing the vans used to deliver goods to customers.

10. Insurance consists of:

RM
Fire insurance for a house in Machang 3,000
Fire insurance for business premises 4,000
Life insurance for employees 2,700
9,700

11. Throughout 2023, Maisara donated several books to the school library worth RM2,500, and the rest
of Maisara made a cash contribution to the approved institution.

12. Rental lease payments are as follows:

Monthly payment for Accumulated rental leases

Cost rental lease as of 31 December 2022
RM RM RM
Van 123,000 900 89,000
Car (new) 105,000 1,100 90,000
Both vehicles are used for business.

13. Depreciation is for assets used for the business. The capital allowance for the current year is
RM3,300, while the balancing allowance for the current year is RM1,600.

14. Maisara has taken several items for personal use, which cost RM500. The market price for the goods
is RM850. Maisara does not record this drawing in the business records.

Required:
Calculate the statutory income of Maisara business for the year of assessment 2023.
QUESTION 3

Mrs Liza runs a printing and book sale business named Puncak Alam Enterprise. Here is information about
the business for the year ending 31 December 2023.

Puncak Alam Enterprise

Profit and Loss Statement for the year ended 31 December 2023
RM RM
Income
Net sales 450,000
Profit from the sale of Ford car 5,000
455,000
Expenses
The cost of goods sold 35,000
Employee wages 72,000
Royalty to the author of the book 60,000
EPF contribution to approved institutions 8,000
Installment payment for buying the ANN printing machine 13,500
Repair of the air conditioner in the printing room 300
Repair of the INN printing machine 1,000
Flight tickets to Langkawi for an employee who attended a work-related 10,000
course
Loss of sales of ONN printing machine 5,000
Buying new equipment in cash 5,000
Expenses for installing new equipment 200
Spending on repairing kitchen cabinets in the storage room 300
Replacing some broken lighting units in the printing room 100
Free lunch for all employees 4,500
Cash prizes to outstanding employees 2,000
Business license charges (including RM50 late penalty for licence 350
renewal)
The cost of the book sample for distributors 5,000
Depreciation expenses 65,750
Provision for bad debts (RM10,000 is confirmed as bad or unrecovered) 30,000 (318,200)
Net profit 136,800

Additional information:
It is given that the eligible capital allowance for the year of assessment 2023 is RM55,000, the balancing
charge is RM8,000, and the balancing allowance is RM3,000.

Required:
Calculate the statutory income of Mrs Liza’s business for the year of assessment 2023.
QUESTION 4

Mrs Rosie opened a bakery, cake and biscuit shop in Simpang Renggam called Bread Top Story in early
2011. The following is information on the sole proprietorship business for the financial year ending 31
December 2023.

Bread Top Story

Profit and Loss Statement for the financial year ended 31 December 2023
RM RM
Income
Net sales 118,000
Van rental 2,500
120,500
Expenses
The cost of goods sold 38,000
Employee salary 39,600
Shop rental (1/8 of the shop space is allocated as an employee lounge) 6,000
Electricity and water expenses 5,500
Instalment payment for the purchase of baking oven (interest RM2,400) 7,200
Repair of malfunctioning mixer machine 1,300
Free lunch for all employees 3,000
Loss of sales of baking ovens 1,200
Replacing four lighting units in the sales and exhibition section 850
Cash prize to Ms Linda as an outstanding employee 1,000
Cost of renewing a business license (including a late fine of RM50) 400
Depreciation expenses 2,000
Provision for bad debt (RM300 is confirmed as bad or unrecovered) 1,000
Donation of cupcakes to the Orphanage House 1,000
(108,050)
Net profit 12,450

Additional information:
1. Puan Rosie hired a disabled worker as a cashier with a salary of RM800 per month who worked
throughout 2023 (January to December).
2. The eligible capital allowance for the year of assessment 2023 is RM1,800, while the balancing
allowance is RM700.

Required:
Calculate Mrs Rosie’s total income for the year of assessment 2023.