To explain: The difference in objectives of GAAP accounting and tax accounting methods.
Answer to Problem 17.1Q
The income tax expenditure shown on financial statements of the company does not similar to the income taxes paid in actual by the company during the year. This difference arises because of the difference in objectives of GAAP (Generally accepted accounting principles) and the tax accounting.
Explanation of Solution
GAAP Accounting
Generally accepted accounting principles includes the set of accounting standards, principles and procedures that is followed by the companies for final report of financial statements.
Tax Accounting:
Tax Accounting includes accounting methods and principles related to
There is a difference in objectives of GAAP accounting and the Tax accounting. The main objective of GAAP accounting is to provide information related to the financial statements of the companies. In contrast to this, Tax accounting focuseson maximization of the tax revenue, achieve economic objectives and promote social objectives.
The income tax expense and the income tax payable are not same due to the difference in objectives of GAAP accounting and Tax accounting.
Want to see more full solutions like this?
Chapter 17 Solutions
Intermediate Accounting (2nd Edition)
- What events create permanent differences between accounting income and taxable income? What effect do these events have on the determination of income taxes payable and deferred income taxes? Identify three examples of permanent differences between accounting income and taxable income.arrow_forwardWhat is deferred tax liability and deferred tax liability in accounting?arrow_forwardWhat are the objectives of accounting for income taxes?arrow_forward
- In what ways does revenue recognition differ from other financial accounting procedures?arrow_forwardWhat is an assessment under the income tax assessment legislation? and why are assessments important?arrow_forwardHow have the recent revenue recognition standards affected the book/ tax accountingarrow_forward
- What types of ordinary and statutory income do not constitute assessable income?arrow_forwardExplain the folllowing a- what is Income Taxa compliance b- Are Tax rates influence Income Tax compliance c- The process of Income Tax compliancearrow_forwardWhich of the following should be considered as nonmonetary? Group of answer choices Taxes payable Accrued expense and other payables Trade receivables Deferred tax liabilitiesarrow_forward
- Which of the following cases would affect the noncurrent liabilities portion of the balance sheet? Current Tax Expense < Tax Payments Taxable Income > Accounting Income Taxable Income < Accounting Income Current Tax Expense > Tax Paymentsarrow_forwardexplain how accounting profit and taxable profit differ.arrow_forwardUnder what responsibility would enforcing tax laws go under ?tax accounting, Financial Accounting or managerial accounting.arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning