BU357 Lecture Notes - Property Income, Dividend Tax, Basis Of Accounting
Document Summary
Interest income is the compensation received for the use of borrowed funds. Income from property is the profit therefrom for the year , hence net of related expenses. Income from property does not include capital gains or losses these are considered a separate source of income. Two methods individuals use to recognize interest income: section 12 (4: cash method used when interest is received every year, annual accrual method used when interest is not received every year. Corporations used the annual accrual method to recognize interest. Income is included on a daily basis and accrued to the taxation year end (even though it is not received or receivable until some point in the future) Interest is charged at 12%, compounded annually and payable at the end of the two year. Cash method: full amount recognized on anniversary date. Annual accrual method: interest recognized (accrued) each year its earned. Year 2: (,000 + ,000) x 12% = ,440.
