Using different accounting methods on financial statements and tax returns will create:
A)No effect on the balance sheet,only the income statement.
B)No effect on the balance sheet or the income statement.
C)A deferred tax liability.
D)An illegal situation.

Question

Quizplus · Accepted Answer

Using different accounting methods on financial statements and tax returns will create a deferred tax liability. This occurs because the taxable income calculated using tax accounting method may not match the taxable income calculated using financial accounting method. The deferred tax liability is the amount of taxes that will eventually become payable in the future when the temporary differences reverse.

Using Different Accounting Methods on Financial Statements and Tax Returns