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Interpreting Financial Statements
The Income Statement
The Income Statement is a very useful tool for understanding a company's performance. It is the most recognized financial statement because it shows whether the company is making profits or losses in a particular period e.g. month, quarter or year. It is also known as the profit and loss account.
In this article, we took the common components of this financial statement and what a reader can decipher from them. Whereas an income statement in a particular period is useful, the apparent value is derived when it is compared against prior periods or against an expectation such as a budget. One is then able to understand whether the company is performing to expectation or whether profitability is declining.
1. Sales/ Revenue
This is the top line of the income statement, it records earnings from sale of goods or services to customers. But when is a sale made?
Some of the corporate scandals reported in the press have been on manipulation of sales figures by recording sales too soon or too late.
Read More
For Business Advisory Services, contact Michael Kimani on mkimani@mgkconsult.co.ke
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Value Added Tax (VAT) Act 2013 Highlights
Charge to tax
Value Added Tax, is be charged on –
a) a taxable supply made by a registered person in Kenya;
b) the importation of taxable goods; and
c) a supply of imported taxable services.
The VAT Act 2013 provides for only the 0% and the 16% VAT rates.
VAT Refund
The VAT Act 2013 is silent about timelines which VAT refund claims can be lodged. An amendment has been proposed in the 2015/2016 budget for such refunds to be made within twelve months from the date the tax became due and payable.
Goods Exempt from VAT
i. Live animals, meat, fish, poultry, eggs and various animal products
ii. Unprocessed (raw) milk and processed infant milk
iii. Fruits and vegetables
iv. Maize corn and flour and milled rice
v.Fertilizers, seeds and various agricultural inputs
Services Exempt from VAT
i. Financial Services
Bank account services; money transfers; credit, debit cards, & ATM services; forex transactions; cheque handling; loans and other credit facilities; securities handling; and agency banking services. Cash transit and ATM re-stocking services are taxable as is the supply of ATM machines and software.
ii. Insurance Services
Insurance and re-insurance services and premiums are exempt from VAT. However the following insurance sector professional services will be taxable: insurance and risk consultancy services; actuarial services; and insurance assessment and loss adjusting services.
Read More on the VAT Act 2013
For Tax Services, contact Beatrice Njambi on bnjambi@mgkconsult.co.ke
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