Question

Which of the following are temporary differences that are normally classified as expenses or losses that are deductible after they are recognized in financial income?

a. Advance rental receipts.
b. Product warranty liabilities.
c. Depreciable property.
d. Fines and expenses resulting from a violation of law.

Answer 1

The temporary differences that are normally classified as expenses or losses and are deductible after they are recognized in financial income include fines and expenses resulting from a violation of law, product warranty liabilities, and advance rental receipts.

Step-by-step explanation:

The temporary differences that are normally classified as expenses or losses and are deductible after they are recognized in financial income include:

1. Fines and expenses resulting from a violation of law: These expenses are recognized in the financial income when incurred and are deductible in the same period for tax purposes.
2. Product warranty liabilities: When a company recognizes an expense for warranty claims, this creates a temporary difference between financial income and taxable income. The deductible amount of warranty expenses will be recognized in future periods when the warranty services are provided.
3. Advance rental receipts: If the company receives advance rental payments before the rent is recognized as income in the financial statements, it creates a temporary difference. The rental income will be taxable when it is recognized in the future.