Differences between pretax financial accounting and taxable income that are expected to reverse in one or more future accounting periods are called

Question

Quizplus · Accepted Answer

The differences between pretax financial accounting and taxable income that are expected to reverse in one or more future accounting periods are called temporary differences. These differences arise because of differences in the timing of recognition of revenue and expenses for financial accounting and tax purposes. Temporary differences are expected to reverse in the future, resulting in the eventual alignment of financial accounting and tax accounting. Permanent differences, on the other hand, are not expected to reverse and result in a permanent gap between financial accounting and tax accounting. Material differences are differences that have a significant impact on the financial statements and could affect the decisions of users of financial statements. Quasi differences is not a term used in accounting.

Differences Between Pretax Financial Accounting and Taxable Income That Are