Accounting for Income Tax Concepts
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Questions and Answers

Which type of income appears in the traditional income statement?

  • Temporary Differences
  • Taxable Income
  • Permanent Differences
  • Accounting Income (correct)

Which of the following is an example of a permanent difference in income?

  • Interest income on time deposit
  • Life insurance premium
  • Dividends received (correct)
  • Tax penalties

What do permanent differences pertain to?

  • Nontaxable revenue (correct)
  • Tax penalties
  • Nondeductible expenses
  • Timing differences

Which type of difference includes timing differences between accounting income and taxable income?

<p>Temporary Differences (A)</p> Signup and view all the answers

When an entity is the beneficiary of a life insurance policy of an officer, what is the treatment of the premium paid by the entity?

<p>It is not tax deductible but is an expense for accounting purposes (B)</p> Signup and view all the answers

Which type of difference gives rise to deferred tax asset and liability?

<p>Temporary Differences (C)</p> Signup and view all the answers

What gives rise to a deferred tax liability?

<p>Taxable temporary differences (B)</p> Signup and view all the answers

In what situation does a deferred tax asset arise?

<p>When there are deductible temporary differences (A)</p> Signup and view all the answers

What is the tax base of an asset?

<p>The amount deductible for tax purposes in the future (B)</p> Signup and view all the answers

Which situation results in a deferred tax liability due to timing differences?

<p>Accelerated depreciation for accounting purposes but not for tax (D)</p> Signup and view all the answers

What kind of temporary difference results in a deferred tax asset?

<p>Expenses and losses deductible for tax in current period but not for accounting yet (A)</p> Signup and view all the answers

Why are assets revalued upward ignored for tax purposes?

<p>To prevent overvaluation of assets on the tax return (D)</p> Signup and view all the answers

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