Read the article “Income-tax Accounting: Same Difference?”
Review the article and indicate your understanding of tax laws discussed with an example of how treatment of a transaction would be considered different in tax accounting, general accounting, or income recognition
Answer
Each country has different income tax law. And accounting standards body such as IFRS & GAAP has few differences in income tax accounting as well.
As per accounting standards, accounting, the main reason of income tax accounting is the temporary difference.
Temporary different is the difference in income or expenses in company’s book and income tax treatment of the transactions that reverse in future years.
For e.g.
Depreciation
A company may use straight line depreciation method for its assets, however, on the other hand, income tax laws may require using written down value method of depreciation or different assumed life. Due to this income of a company will be different in both sets of books.
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