MZUMBE UNIVERSITY

DAR ES SALAAM CAMPUS COLLEGE

FIN 321

BUSINESS INCOME TUTORIAL QUESTIONS

QUESTION ONE

The following financial information is gathered in the Electronic Fiscal Devices (EFDs)
of individuals conducting business in Arusha City.

a) Ms Anna’s sales of TZS 50,000

b) Ms Aisha’s sales of TZS 150,000
c) Mr Bakari’s Sales of TZS 250,000
d) Mr Abubakari’s Sales of TZS 650,000
e) Mr Juma’s sales of TZS 500,000
f) Mr Ahmed’s sales of TZS 450,000
g) Dr Jamal’s sales of TZS 2,250,000
h) Dr Hamis’s sales of TZS 3,250,000
i) Dr Julius’s sales of TZS 4,250,000
j) Mrs Jamal’s sales of TZS 750,000
k) Mrs Hamad’s sales of TZS 850,000
l) Mrs Kyando’s sales of TZS 6,500,000
m) Mrs Jamal’s sales of TZS 950,000
n) Mrs Sanga’s Sales of TZS 2,170,000
o) Mrs Tweve’s sales of TZS 1,000,000
p) Mrs Kyando’s sales of TZS 1,170,000
q) Ms Tave’s sales of TZS 5,000,000
r) Mr Daniel’s sales of TZS 10,170,000
s) Mr Mtana’s sales of TZS 4,170,000
t) Mr Davie’s sales of TZS 5,170,000

Required:

By applying the most recent presumptive tax table, calculate the tax liability if

a) The above figures are weekly sales turnover; and

b) The above figures are monthly sales turnover

QUESTION TWO

ITEZI Enterprise is a resident non-incorporated business dealing with the

manufacturing and sale of outdoor decorations. For the year of income 2018, during
the Enterprise had a turnover of TZS.850,000,000, including a profit on the sale of a
machine of TZS.30,000,000.

The following information is available: Amounts in TZS. “000”

 Sundry expenses 120,000 (NOTE 1)

 Board members meeting allowances 100,000
 Acquisition of assets 2,265,000 (NOTE 2)
 Contractual penalties 320,000 (NOTE 3)
 Insurance 30,000
 Dividends 48,000 (NOTE 4)
 Interest expenses 550,000 (NOTE 5)
 Depreciation 6100,000 (NOTE 6)
 Directors vacation 88,000
 Rent and rates 200,000
 Travelling expenses 32,000
  Legal and professional fees 730,000 (NOTE 7)
 Provisions 836,000 (NOTE 8)
 Interest received 17,000
 Salaries 200,000
 Contributions to approved pension funds 910,000 (NOTE 9)
 Donations and subscriptions 1,062,000 (NOTE 10)
 Unrelieved losses for 2017 TZS 50,000

Additional Notes:

1. Sundry expenses include road traffic fine of TZS.4,000,000

2. Acquisition of depreciable assets during the year were as follows: TZS. “000”
i. Toyota pick up 13,750
ii. Toyota land cruiser 17,500
iii. Toyota range rover 15,000
iv. Bus carrying 35 employees 40,000

All these assets were used in the business during the year. The Tax written down value
as at 31st December 2017 after pooling assets based on the Income Tax, Cap 332 is as
follows:

CLASS 1 II III IV
TWD (TZS) 25,000,000 61,500,000 30,000,000 40,000,000

3. The amount was received as a result of a business contract that the other party
breached.
4. A dividend was received from Chato Milling Company, where ITEZI Enterprise
owns 24.9% of the total issued share capital.
 5. Interest expenses comprise interest of TZS.15,000,000, paid on bank overdraft,
finance charge of TZS.20,000,000 on deferred payment agreements, and interest
of TZS.15,000,000 on failure to pay previous taxes on time.
6. The figure of depreciation was computed based on the International Financial
Reporting Standard (IFRS) for accounting purposes.
7. Legal and professional fees include: Details TZS. Audit fees 5,000,000 Legal fees
for employee contract 5,000,000 Purchase of mobile phones for tender board
members to facilitate winning of tender 20,000,000
8. Provisions includes provision for bad debt TZS.8,000,000, provision for stock
damages TZS.10,000,000 and provision for repairs TZS.18,000,000.
9. Contributions to approved pension fund comprised of employees contribution
and employers’ contributions of equal amount. 10. The donation and
subscriptions include:
Details TZS
Subscription to the trade association 17,000,000
Donations to Grace children’s centre (Registered charity) 20,000,000
Donation to a creative craftsman who won the Dar es Salaam arts 25,000,000
award during 2017

REQUIRED:
Calculate the ITEZI Enterprise income from business for the year of income 2018.

QUESTION THREE

Habari Co Ltd always prepares accounts for all the years it has been in business for
several years. The company recently received a letter from the Commissioner of Income
Tax requesting to call at the Income Tax offices to discuss its income tax return and
accounts. The Commissioner stated that Habari Co Ltd had incorrectly added back or
deducted several items to the net profit which should have been deducted or disallowed
for income tax purposes.

Habari Co Ltd’s detailed 2018 profit and loss account is given below:

Sales 983,300,000

Gains on Sales of vehicle based on Tax Wear and Tear 6,000,000

CRDB Bank interest – On Current account 344,000

Insurance gains —money stolen 1,500,000

- stock destroyed by fire 2,000,000 3,500,000

993,144,000

Less:

Staff salaries and wages 235,000,000

Business portion of motor expenses 122,000,000

Depreciation: motor vehicles & equipment 40,200,000

Light and heating 75,000,000

Newspaper advertising 3,460,000

Donations: staff sport club 5,000,000

: On Political Campaign 2,000,000 7,000,000

Repairs and maintenance 12,000,000

New shop front-structural alteration 80,000,000

Balance of income tax paid 2017 3,000,000

Director’s home telephone 2,400,000

Court fine- motoring 2,000,000

Legal fees 10,000,000

Director’s personal accident policy premium 16,600,000

Gratuities to staff 16,000,000

Loss on part exchange of business van 11,000,000

Customers’ entertainment 8,000,000

Insurance of premises 20,000,000

Bad debts Written off 6,000,000

Extension to rear of shop 132,000,000

Amortization of shop freehold 4,000,000

Charges for preparation of accounts 8,040,000

Penalties - Delay in submission of Tax Returns 2,200,000

Net profit 177,244,000

Required:

Compute taxable profits of Habari Ltd for the year of income 2018 if the acceptable
depreciation allowance is shs 70,000,000 and assuming its year of income starts from
1st January each year

QUESTION FOUR
Below is the income statement of Simbiatu Company Limited, located in Simiyu in the
Lake Zone. It is a newly established entity dealing with the assembling of tractors due
to Kilimo Kwanza Projects requirements. The Company is having the Performance
agreement with the Government of the URT. The Statement covers the year ended
31.12.2020

Item Amount Amount

Gross profit 618,750,000
Rent income (Investment) 156,250,000
Other Income 25,000,000
800,000,000
Less: Management salaries 43,750,000
Staff salaries 21,250,000
Hire of Equipment 18,125,000
Depreciation 7,500,000
Casual Labour 10,500,000
Office Rent 9,000,000
Vehicle repairs 19,500,000
Business Promotions 5,250,000
Donations 11,375,000
Repairs factory premises 28,500,000
Office expenses 22,500,000
Other Capital allowances 73,750,000
Accountancy Fees 1,500,000 272,500,000
Net Profit 527,500,000

Additional information
 a) Other income include the profit on disposal of fixtures and fittings amounting to Tzs
15,000,000
b) Casual labour is made up of factory hands and wages of employees in director’s
Private property amounting to Tzs 6,250,000 and Tzs 4,250,000 respectively
c) Vehicle repairs includes cost of new engine of Tzs 4,500,000, fuel and lubricants of
Tzs 8,750,000 and repairs of tyres and tubes Tzs 6,250,000
d) Donations consist of the following: Chama Cha Mapinduzi (CCM) Tzs 7,500,000,
Tokomeza zero under Education Fund Act Tzs 125,000 and Ilala Municipal Council
Tzs 3,750,000
e) Business promotions:
 Wedding reception for Director’s wedding day Tzs 3,500,000
 Cost of entertaining business partners Tzs 1,750,000
f) Repairs to Factory premises:
 Cost of new tiles for floor Tzs 16,000,000
 New gates for factory Tzs 10,000,000
 Repair of cracks in the wall Tzs 2,500,000
g) Office expenses includes new personal computer and stationery amounting to Tzs
18,750,000 and Tzs 3,750,000 respectively
h) Office rent paid of Tzs 9,000,000 represents two years rent for the period ending 31st
December, 2021.
i) Depreciation allowance agreed with the Tanzania Revenue Authority Tzs 15,575,000
Required:

i. Determine the Business Chargeable Income for the year 2020 year of assessment
ii. Calculate the tax liability of the company for 2020 assessment year, if any