Accounting Profit and Taxable Income can often differ because:

Question

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General purpose financial reporting is designed to provide information to a wide range of stakeholders, while the income tax system is primarily aimed at generating revenue for the government. This can lead to differences in the way that items are classified and valued, resulting in variations between accounting profit and taxable income. Options A and D are incorrect as bad debts and depreciation are generally allowable deductions for tax purposes. Option B is incorrect as revenue received in advance is generally taxable in the period it is earned, rather than when it is received.

Accounting Profit and Taxable Income Can Often Differ Because