ATXB213, Malaysian Taxation 2013/2014

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ADDITIONAL TUTORIAL: BUSINESS INCOME

QUESTION 1

Encik Ilham, a Malaysian resident is the owner of Ilham Printing and Stationary, which have
been in operation since 1 October 2004. Its principal activities are receiving printing orders of
wedding card, business card, banners, buntings and others. In addition, he also sells stationary to
its customers. The business income statement for the year ending 31 December 2012 is as
follows:
Note RM RM
Sales & service revenue 250,000
Less: cost of sales 1 26,500

Gross Profit 223,500
Add: Other income 2 5,000
228,500
Less:
Salary & EPF 3 90,650
Transportation cost 4 15,000
Donations and publicity 5 9,000
Professional fees 6 2,600
Provision for doubtful debts 7 12,000
Repairs and maintenance 8 34,000
Rental of premises 9 39,000
Interest expenses 10 3,000 (205,250)
Profit before taxation 23,250

Note:
1. Cost of sales include depreciation of fixed assets amounting to RM3,900 and withdrawal of
cash by Encik Ilham for personal use amounted to RM2,000.

2. Other income:
i. Capital gain from disposal of a printing machine RM500
ii. Dividend from Jasa Niaga Sdn Bhd.(net) RM4,500
RM5,000

3. Staff remuneration comprises:
i. Salaries RM75,200
ii. Employee Provident Fund (EPF) RM15,450
RM90,650

ATXB213, Malaysian Taxation 2013/2014

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Included in the salary is the salary of Encik Ilham amounted to RM6,500 and the salary of
a disabled employee amounted to RM500 per month.
Included in the EPF is 20% contribution to an employee who has been working with the
business since its first day of operation. Monthly salary of this employee is RM2,000.

4. Included in the transportation cost is lease rental of a car to be used by Encik Ilham for the
business. The car has been rented out since 2005 and never been rented out by other lessee
prior to that. Cost of the car when new is RM200,000. In year 2012, Ilham Printing and
Stationeries has paid RM12,000 for the rental, while the total amount paid since the car
first being rented out was RM60,000.


5. Donations and publicity comprise:
i. Advertisement RM1,000
ii. Cash donations to an approved institution RM2,000
iii. Entertaining existing clients RM5,000
iv. Leave passage for Encik Ilham and family RM1,000
RM9,000

6. Professional and subscription fees comprise:
i. Services of tax agent (inclusive of RM500 for consultancy) RM2,000
ii. Non trade debt collection expenses RM 600
RM2,600

7. Provision for doubtful debts comprise:
i. Specific provision RM4,000
ii. General provision RM8,000
RM12,000

8. Repairs and maintenance comprise:
i. Repairs of printing machine RM4,000
ii. Renovation of the shop lot RM5,000
iii. Purchase of new Photostat machine RM5,000
RM14,000

9. Included in rental is RM3,000 rental fee for January 2013, which was paid in advance in
December 2012.

ATXB213, Malaysian Taxation 2013/2014

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10. On 1 January 2012, Encik Ilham obtained loan amounted to RM50,000 from Agro Bank Sdn
Bhd. The interest rate is 6% per annum. 50% of the loan has been used as working capital
for the business. While another 50% has been used to purchase shares from Jasa Niaga Sdn.
Bhd.

11. Other information:
Capital allowances for Ilham Printing Sdn. Bhd. for year of assessment 2012 was RM4,100
(inclusive of new Photostat machine) while balancing charge was RM2,020.

Required:
Show the computation of statutory income for the above business for the year of assessment
2012.