Using different accounting methods on financial statements and tax returns will create:
A)No effect upon the balance sheet,only the income statement.
B)No effect upon the balance sheet nor 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 can create a deferred tax liability. This occurs when there is a difference between the income tax expense recognized on the income statement and the taxes payable on the tax return. The difference is recognized as a liability on the balance sheet because eventually, the taxes will need to be paid. However, using different methods does not affect the legality of the situation.

Using Different Accounting Methods on Financial Statements and Tax Returns