Which of the following correctly describes the effects of accruing income tax expense at year-end?
A)A cash payment is made to pay the taxes due.
B)Liabilities are not affected.
C)Retained earnings decreases.
D)Net income increases.

Question

Quizplus · Accepted Answer

Accruing income tax expense at year-end reduces the company's net income, which in turn decreases the amount of retained earnings. This is because income tax expense is a non-cash expense that is recognized on the income statement but does not require an immediate cash payment. Therefore, liabilities are not affected and there is no cash payment made to pay taxes due.

Which of the Following Correctly Describes the Effects of Accruing