Which of the following describes a temporary difference?
A)A difference that will be corrected in an amended tax return.
B)A difference arising from an uncertain tax position.
C)A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes.
D)A timing difference between the recognition of revenue or expense under GAAP and tax purposes.

Question

Quizplus · Accepted Answer

A temporary difference is a timing difference between the recognition of revenue or expense for financial reporting purposes under GAAP and tax purposes. This difference is temporary because it is expected to be resolved in future periods, typically when the related asset is recovered or liability is settled. Examples of temporary differences include depreciation and bad debt expense. Options A and B refer to other types of differences, while option C describes a permanent difference.

Which of the Following Describes a Temporary Difference