Question

when income tax expense for a period is greater than income tax payable the difference will be reported how and on which financial statement?a. deferred tax liability and statement of cash flowsb. deferred tax asset and balance sheetc. deferred tax liability and balance sheetd. deferred tax asset and statement of cash flows

Answer 1

The difference between a greater income tax expense and income tax payable is reported as a deferred tax liability on the balance sheet. Option c is correct.

Step-by-step explanation:

When income tax expense for a period is greater than income tax payable, the difference is reported as a deferred tax liability on the balance sheet. This situation arises because the company has essentially underpaid its taxes relative to the expense recognized in its financial statements.

The expense shows what the company should pay based on accounting principles, while the payable represents the actual tax due to the authorities for the period. Over time, this liability is expected to reverse as the company pays more taxes to the government.

Option c is correct.