Interperiod Tax Allocation Basics

Question 1

What is the principle of recognizing income tax expense through the year called?

Answer 1

Interperiod Tax Allocation

Question 2

Define “deferred income tax”

Answer 2

The amount of income tax expense that is not currently due

Question 3

Define “deferred income tax provision”

Answer 3

1. )The amount of income tax expense that is not currently due;
2. )Equals the net sum of the change in the deferred tax accounts.

Question 4

Define “taxable income”

Answer 4

Income before tax for tax purposes

Question 5

Define “income tax liability”

Answer 5

The amount of income tax the firm must pay on taxable income for a year

Question 6

Define “pretax accounting income”

Answer 6

Income before income tax for financial accounting purposes determined by applying GAAP

Question 7

Define “income tax expense”

Answer 7

The account reported in the income statement that measures the income tax cost for the year’s transactions. It is the net sum of the income tax liability, net change in the deferred tax accounts

Question 8

Define “current income tax provision”

Answer 8

The amount of income taxes due for the year (same as income tax liability).