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

Question

Quizplus · Accepted Answer

The reason companies keep separate sets of accounting records for financial reporting and income tax computations is that financial reporting rules and ITA regulations differ in many ways. The rules for financial reporting are set by accounting standards while the ITA regulations are set by tax laws. Therefore, companies need to keep separate records to ensure compliance with these different rules and regulations.

Most Companies Keep Separate Sets of Accounting Records for Financial