When certain expenditures result in tax credits that directly reduce taxes, the companywill most likely record:A . a deferred tax asset.B . a deferred tax liability.C . no deferred tax asset or liability.

When certain expenditures result in tax credits that directly reduce taxes, the companywill most likely record:A . a deferred tax asset.B . a deferred tax liability.C . no deferred tax asset or liability.

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter2: Gross Income And Exclusions

Section: Chapter Questions

Problem 1MCQ: The definition of gross income in the tax law is: All items specifically listed as income in the tax...

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

When certain expenditures result in tax credits that directly reduce taxes, the company
will most likely record:
A . a deferred tax asset.
B . a deferred tax liability.
C . no deferred tax asset or liability.

Definition Definition Estimated future tax made while preparing accounts. Deferred tax is estimated based on past and present transactions from financial statements. It is not the actual tax that needs to be paid or is refundable from the revenue authority; it is an accounting entry. It is necessary to account for deferred tax due to difference between accounting profits and taxable profits.

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