Which of the following best describes a future tax liability (FTL)?
A)A FTL arises when the company does not pay all of its taxes due in the current year.
B)A FTL arises when there are temporary differences between the income as calculated on the financial statements and on the tax return.
C)A FTL arises when there are permanent differences between the income as calculated on the financial statements and on the tax return.
D)A FTL arises when the company has paid tax in advance of when it is due.

Question

Quizplus · Accepted Answer

A future tax liability (FTL) arises when there are temporary differences between the income as calculated on the financial statements and on the tax return. This means that the company has recognized income or expenses in their financial statements that will be taxed or deductible in a future tax year. The difference in timing between when the income or expense is recognized on the financial statements and when it is recognized for tax purposes creates a future tax liability.

Which of the Following Best Describes a Future Tax Liability