Temporary differences are book-tax differences that appear in both the GAAP financial statements and the Federal income tax return but not in the same reporting period.

Question

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Temporary differences arise when there is a discrepancy between the timing of income or expense recognition in the financial statements prepared according to Generally Accepted Accounting Principles (GAAP) and the timing for tax purposes on the Federal income tax return. These differences will reverse and become aligned in future reporting periods.

Temporary Differences Are Book-Tax Differences That Appear in Both the GAAP