Accounting for Income Taxes

Question	Answer
Temporary Differences	The difference between the tax basis of an asset or liability and its reported (carrying value) amount in the financial statements. Results in deductible amounts or taxable amounts in future years
Taxable amounts	Increase taxable income in future years - difference between book basis and tax basis for prepaid insurance - excess tax depreciation over book depreciation - installment sales contract accounted for on cash basis for tax purposes and on accrual basis for book purposes
deductible amounts	decrease taxable income for future years - Product warranty liabilities - subscriptions received in advance - unearned rent revenue
Current tax expense	a component of income tax expense. Represents the amount of income taxes payable for the period.
Deferred tax expense	a component of income tax expense. It is how much the DTL balance increased from the beginning to the end of a period.
Deferred tax asset	represents the increase in taxes refundable (or saved) in future years as a result of deductible temporary differences existing at the end of the current year.

Resource summary

	Created by Laura Winchester almost 10 years ago