Tax Accounting

Tax Accounting - Introduction to Tax Accounting Although...

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Introduction to Tax Accounting Although most of the information on a company’s income tax return comes from the income statement, there often is a difference between pretax income and taxable income. These differences are due to the recording requirements of GAAP for financial accounting (usually following matching principle and allowing accruals of revenue and expenses) and the requirements of the IRS’s tax regulations for tax accounting (which are more oriented to cash). Such timing differences between financial accounting and tax accounting create temporary differences. Also there are events, usually one-time, which create "permanent differences", such as GAAP recognizing as expense an item which the IRS will not allow to be deducted. Temporary Differences A temporary difference between pretax financial accounting income and taxable income often creates the amount to be included in taxable income one or two years before or after the revenue or expense was realized in financial accounting. Recording in this matter, in turn, creates a difference of the amount that is recorded of an asset or a liability on the financial statements. Items that create temporary differences include:
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This note was uploaded on 04/03/2012 for the course ACCT 325 taught by Professor Warren during the Spring '08 term at Rutgers.

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Tax Accounting - Introduction to Tax Accounting Although...

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