Question

Items that are allowable deductions for income tax reporting but do not qualify as expenses under GAAP are known as_________

Answer 1

Permanent differences

Step-by-step explanation:

Answer 2

Items that are allowable deductions for income tax reporting but do not qualify as expenses under GAAP are known as temporary differences.

Step-by-step explanation:

Temporary differences arise when there is a variance between the timing of recognizing items for income tax purposes and financial reporting purposes under Generally Accepted Accounting Principles (GAAP). While certain items may be deductible for tax purposes in a specific period, GAAP might not allow recognizing them as expenses during the same period.

These differences create temporary discrepancies between taxable income and pretax financial income, impacting the amount of income tax reported in financial statements.