Deferred taxes result from:
A) The fact that bond interest is deductible in the computation of taxable income.
B) Depositing income taxes due in future years in a special fund managed by an independent trustee.
C) Timing differences between certain revenue and expense items recognized in financial statements and in income tax returns.
D) The inability of a bankrupt company to pay its income tax liability on schedule.

Question

Quizplus · Accepted Answer

Deferred taxes result from timing differences between certain revenue and expense items recognized in financial statements and in income tax returns. This means that the timing of when certain items are recognized for financial reporting purposes may be different than when they are recognized for tax purposes, resulting in deferred tax liabilities or assets. Choice A is incorrect because bond interest being deductible is not related to deferred taxes. Choice B is incorrect because depositing income taxes in a special fund does not result in deferred taxes. Choice D is incorrect as the inability to pay taxes on schedule is not related to deferred taxes.

Deferred Taxes Result From