Accounting for Income Tax Concepts

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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?

Temporary Differences 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?

It is not tax deductible but is an expense for accounting purposes Signup and view all the answers

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

Temporary Differences Signup and view all the answers

What gives rise to a deferred tax liability?

Taxable temporary differences Signup and view all the answers

In what situation does a deferred tax asset arise?

When there are deductible temporary differences Signup and view all the answers

What is the tax base of an asset?

The amount deductible for tax purposes in the future Signup and view all the answers

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

Accelerated depreciation for accounting purposes but not for tax Signup and view all the answers

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

Expenses and losses deductible for tax in current period but not for accounting yet Signup and view all the answers

Why are assets revalued upward ignored for tax purposes?

To prevent overvaluation of assets on the tax return Signup and view all the answers

Accounting for Income Tax Concepts

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Questions and Answers

Which type of income appears in the traditional income statement?

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

What do permanent differences pertain to?

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

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?

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

What gives rise to a deferred tax liability?

In what situation does a deferred tax asset arise?

What is the tax base of an asset?

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

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

Why are assets revalued upward ignored for tax purposes?

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