Final answer:
The correct answer is a) Differences that will result in deductible but not taxable amounts in future periods. Temporary differences are timing differences between taxable income and financial accounting profit that reverse over time and either cause deferred tax assets or liabilities.
Step-by-step explanation:
Temporary differences in a tax context refer to differences between taxable income and accounting profit that are capable of reversal in future periods. The direct answer to your question is: a) Differences that will result in deductible but not taxable amounts in future periods.
These temporary differences can arise due to the timing of when income and expenses are recognized for tax purposes compared to when they are recognized in financial accounting. For example, revenue might be recognized for accounting purposes in one period but be taxable in another period when actually received. Expenses could also be deducted for tax purposes in a different period from when they are recorded in the financial statements.
This creates either deferred tax assets or liabilities on the balance sheet, depending on whether those differences are expected to result in deductible amounts (tax assets) or taxable amounts (tax liabilities) in the future.