Question

Which of the following differences would result in future taxable amounts? a. Expenses or losses that are tax deductible after they are recognized in financial income. b. Revenues or gains that are taxable after they are recognized in financial income. c. Expenses or losses that are tax deductible before they are recognized in financial income. d. Both (a) and (b) will result in future taxable amounts. e. Both (b) and (c) will result in future taxable amounts

Answer 1

In terms of future taxable amounts, options (a) and (b) both lead to these amounts due to the recognition timing differences in tax deductible expenses and taxable revenues in financial and tax accounting respectively.

Step-by-step explanation:

When looking at future taxable amounts, it's important to understand how they are determined by the timing of recognition between tax accounting and financial accounting. Option (d) Both (a) and (b) will result in future taxable amounts is the correct answer. This is because:

• (a) Expenses or losses that are tax deductible after they are recognized in financial income will lead to future taxable amounts since you'll have lower deductions in the future.
• (b) Revenues or gains that are taxable after they are recognized in financial income also indicate future taxable amounts because you'll have taxable income that has not yet been taxed.

Options (c) represents a situation that would result in future deductible amounts, as you receive the tax benefit before it impacts the financial income.