Differences between financial accounting and tax accounting result in a company being permitted to defer paying some of its income tax expense, in which case it will report a deferred tax liability.

Question

Quizplus · Accepted Answer

This statement is true. Financial accounting and tax accounting have different rules and methods of calculating income and expenses, which can result in different amounts of taxable income and tax liability. If a company is using a method of accounting that defers some of its tax liability, it will report a deferred tax liability on its balance sheet.

Differences Between Financial Accounting and Tax Accounting Result in a Company