Corporate Income Tax Flashcards
What is Provision for Income Tax and what is it’s purpose?
Provision for Income Tax refers to either income tax expense or recovery, but they use provision as a vague term to cover either.
It is something corporations often label their income tax expense as, because it can fit all circumstances whether theres an expense or recovery of income taxes. Rather than switch it to “expense” or “recovery” each period as things change, they just use the word provision.
What is a provision?
A provision is an amount set aside from a company’s profits to cover a future liability or loss that is anticipated but not yet certain.
(So it’s like setting aside money for something you expect to happen in the future but aren’t sure about the exact details yet.)
What is Interperiod Tax Allocation?
Allocating tax expense to an appropriate year regardless of when it is actually paid.
(The goal is to make sure that a company’s financial statements accurately reflect its financial performance and position by matching income taxes with the revenue and expenses they relate to, rather than when the tax payments are actually made. This helps in providing a more accurate picture of a company’s financial health.)
Eg. Interperiod tax allocation may adjust by recording a deferred tax liability for the year the taxes are actually owed for, which will then be adjusted when the actual tax payment is made.
Deferred meaning?
In financial and accounting contexts, “deferred” refers to amounts or activities that are postponed to a future date.
What are accurals?
Accruals are accounting adjustments made to record revenues and expenses in the period they occur, even if the cash has not yet been received or paid.
What is a “permanent difference” between accounting income and taxable income?
