Deferred income taxes result from:
A) The fact that bond interest is deductible in the computation of taxable income.
B) Depositing income taxes due in future years in a special fund managed by an independent trustee.
C) Timing differences between when income is recognized in financial statements and in income tax returns.
D) The inability of a bankrupt company to pay its income tax liability on schedule.

Question

Quizplus · Accepted Answer

Deferred income taxes arise from differences in the recognition of income or expenses between financial statements and income tax returns. These timing differences result in temporary differences that will eventually reverse and result in either a tax liability or a tax asset. For example, a company may use accelerated depreciation for tax purposes, but straight-line depreciation for financial statement purposes. This will result in a temporary difference that can create deferred tax liability.

Deferred Income Taxes Result From