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May 01, 2023

Explanatory Notes: 

Cash Receipts:

The cash sales reported by Wezan Pty Ltd is counted in the “assessable income” and it is liable for tax as “ordinary income” under “sec 6-5 ITAA 1997”. Citing “GP International Pipecoaters v FC (1990)” The cash sales are considered as ordinary business proceeds. While the business also reports receipts from debtors of $424,800 and debtors as on 30th June 2020 stood $33,010. Therefore, the same has been added into the assessable income of Wezan Pty Ltd.

Stock In Hand:

As mentioned in “sec 70-35 (2) of ITAA 1997” where the “closing stock” is more than the “opening stock”, the sum that is surplus is viewed as an “assessable income” (Sadiq 2019). Similarly, in case of Wezan Pty Ltd, the company did not report any opening stock and the closing stock stood $23,750. Therefore, “closing stock” is more than the “opening stock” and the same is counted in the “assessable income” of Wezan Pty Ltd under “sec 70-35 (2) ITAA 1997”.

Repairs And Maintenance:

Wezan Pty Ltd reports repairs and maintenance expense of $7,990 however, the company has acquired and installed an air conditioner. The installation of air conditioner is not an allowable deduction while the gravel for car park and new thermostat for refrigerator unit is an allowable deduction under the “sec 25-10 (1) of ITAA 1997” (Barkoczy 2022).

Asset Acquisition:

The company reports acquiring freezer, refrigeration units, Holden – Sedan and Office Equipment. These assets are used by Wezan Pty Ltd for producing the assessable business income. With respect to “sec 40-25 (1)” the decline in value of the aforementioned assets can be claimed by Wezan Pty Ltd.

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