Chapter 13- Accounting For Income Tax

Question 1

The net income for the period before deducting income tax expense.

Answer 1

Accounting income or financial income

Question 2

Accounting income is computed in accordance to?

Answer 2

Philippine accounting standards

Question 3

The income for the period determined in accordance with the rules established by the taxation authorities upon which income taxes are payable or recoverable

Answer 3

Taxable income

Question 4

Taxable income is computed in accordance with?

Answer 4

National internal revenue codes

Question 5

Items of revenue and expense which are included in either accounting income or taxable income but will never be included in the other.

Answer 5

Permanent differences

Question 6

Permanent diffrences are actually pertaining to?

Answer 6

Nontaxable revenue and nondeductible expenses

Question 7

It do not give rise to deferred tax asset and liability because they have no future tax consequences.

Answer 7

Permanent differences

Question 8

Give examples of permanent differences

Answer 8

1. Interest income on deposits
2. Dividends received
3. Life insurance premium
4. Tax penalties, surcharges and fines are not deductible

Question 9

Differences between the carrying amount of an asset or liability and its tax base.

Answer 9

Temporary differences

Question 10

Items of income and expenses which are included in both accounting income and taxable income but at different time periods.

Answer 10

Timing differences

Question 11

Temporary difference that will result in future taxable amount in determining taxable income of future periods when the carrying amount of the asset or liability is recovered or settled.

Answer 11

Taxable temporary difference

Question 12

Temporary difference that will result in future deductible amount in determining taxable income of future periods when the carrying amount of the asset or liability is recovered or settled.

Answer 12

Deductible temporary difference

Question 13

The amount of income tax payable in future periods with respect to a taxable temporary difference.

Answer 13

Deferred tax liability

Question 14

It is the amount attributable to the asset or liability for tax purposes.

Answer 14

Tax base

Question 15

The amount that will be deductible for tax purposes against future profits.

Answer 15

Tax base of an asset

Question 16

It is normally the carrying amount less the amount that will be deductible for tax purposes in the future.

Answer 16

Tax base of a liability

Question 17

Residual amount after recognizing assets and liabilities at fair value.

Answer 17

Goodwill

Question 18

The amount of income tax recoverable in future periods with respect to deductible temporary difference and operating loss carryforward.

Answer 18

Deferred tax asset

Question 19

Excess of tax deduction over gross income in a year that may be carried forward to reduce taxable income in a future year thus, gives rise to a deferred tax asset

Answer 19

Operating loss carryforward

Question 20

2 methods of accounting

Answer 20

Income statement approach and

Statement of financial position approach

Question 21

This method focuses on timing differences only in the computation of deferred tax asset or liability

Answer 21

Income statement approach

Question 22

This method considers all temporary differences including timing differences

Answer 22

Statement of financial position approach

Question 23

Recognition of a deferred tax asset or deferred tax liability

Answer 23

Interperiod tax allocation

Question 24

The amount of income tax paid or payable for a year as determined by applying the provisions of the enacted tax law to the taxable income

Answer 24

Current tax expense

Question 25

The amount of taxable temporary difference multiplied by the tax rate

Answer 25

Deferred tax liability

Question 26

Deductible temporary differences multiplied by the tax rate

Answer 26

Deferred tax asset

Question 27

Reduces the current tax expense for the year and is a deduction from the current tax expense

Answer 27

Income tax benefit account

Question 28

The current year tax expense plus the deferred tax expense arising from taxable temporary differences minus the income tax benefit arising from deductible temporary differences.

Answer 28

Total income tax expense

Question 29

The difference between the change in deferred tax asset and the change in deferred tax liability.

Answer 29

Net deferred tax expense or benefit

Question 30

The current tax expense or the amount of income tax actually payable.

Answer 30

Current tax liability

Question 31

It is a Prepaid income tax and shall be classified as current asset.

Answer 31

Current tax asset

Question 32

An entity shall offset a deferred tax asset against a deferred tax liability when:

Answer 32

1. The deferred tax asset and deferred tax liability relate to income taxes levied by the same tax authority.
2. The entity has a legal enforceable right to set off a current tax asset against a current tax liability.

Question 33

The allocation of income tax expense to the various revenues that brought about the tax.

Answer 33

Intraperiod tax allocation

Question 34

Components of the total income tax expense:

Answer 34

1. Current tax expense
2. Deferred tax expense
3. Deferred tax benefit