Question

A deferred tax asset arises when a revenue is taxed:

A) Currently and recognized in the income statement currently
B) At a later date and recognized in the income statement at a later date
C) At a later date and recognized in the income statement currently
D) Currently and recognized in the income statement at a later date

Answer 1

A deferred tax asset arises when revenue is taxed at a later date but is recognized in the income statement currently, which is answer C. The correct option is C) At a later date and recognized in the income statement currently

Step-by-step explanation:

A deferred tax asset arises when there is a difference between the accounting treatment and the tax treatment of a revenue or expense. More specifically, a deferred tax asset is recognized when income is taxed at a later date but is accounted for in the financial statements currently.

The correct answer to the student's question is C) At a later date and recognized in the income statement currently. This means that for accounting purposes, the revenue or expense is recognized now, but for tax purposes, it will be recognized in the future, thereby creating a temporary timing difference that results in a deferred tax asset.

The correct option is C) At a later date and recognized in the income statement currently