Most companies keep separate sets of accounting records for financial reporting and for income tax computations.Which of the following statements is true?
A)They do it even though this practice is illegal and in violation of international financial reporting standards.
B)They do it because the Income Tax Act requires companies to keep separate records for tax purposes.
C)They do it because financial reporting rules and ITA regulations differ in many ways.
D)They do it to enable a company to do a reconciliation between taxable income and reported profit.

Question

Quizplus · Accepted Answer

Financial reporting rules and ITA regulations differ in many ways, such as the treatment of depreciation, inventory valuation, and revenue recognition. Keeping separate accounting records enables a company to comply with both sets of rules and accurately report its financial performance to relevant stakeholders. It is a common and legal practice, as long as the company follows the relevant accounting and tax laws and regulations.

Most Companies Keep Separate Sets of Accounting Records for Financial