Temporary differences that will cause taxable income in future periods to be higher than book income in future periods give rise to

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Quizplus · Accepted Answer

Temporary differences result from the difference in the recognition of income or expense for book and tax purposes. If taxable income will be higher in future periods due to these temporary differences, it means that the company will have to pay more tax in the future. This gives rise to a deferred tax liability, which represents the amount of tax that will be due in the future. Deferred tax assets, on the other hand, arise when taxable income will be lower than book income in the future, and the company will be able to reduce its tax liability. Permanent differences are differences that do not give rise to deferred tax assets or liabilities. A tax refund receivable is a separate item that represents an overpayment of tax in the current period that will be refunded in the future.

Temporary Differences That Will Cause Taxable Income in Future Periods