The Deferred Tax account should reflect permanent differences but not items that are temporary differences between book accounting and tax reporting.

Question

Quizplus · Accepted Answer

Deferred Tax accounts are meant to reflect temporary differences between book accounting and tax reporting, not permanent differences. Permanent differences do not reverse over time, whereas deferred taxes are meant to account for timing differences that will reverse in the future.

The Deferred Tax Account Should Reflect Permanent Differences but Not