Payables and Taxes Flashcards
G9
Current Income tax Expense equals
Taxable income X enacted tax rate
Taxable income equals
equals pretax accounting income adjusted for the items that are treated differently on the tax return and in the accounting records.
Income tax expense(Benefit)
is the sum of current tax expense and deferred tax expense
Examples of Temporary tax differences
Depreciation
Net Operating loss
Prepaid Expenses
Unearned Revenue
Examples of Permanent tax differences?
State and Local interest income
Life Insurance Premium
Penalties
Federal Income taxes
A deferred tax liability is a tax that
is assessed or is due for the current period but has not yet been paid. A deferred tax liability records the fact the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.
Temporary differences will reverse in the future and results in a
deferred tax asset(DTA) or deferred tax liability(DTL)
Permanent difference will never reverse and will never result in a
DTA or DTL
How to calculate Effective tax Rate?
tax liability / Gross income
The effective tax rate is the
actual tax rate in the current period
The effective tax rate is used to calculate
Current income tax expense
The Enacted tax rate is used to calculate the
DTL/DTA. This is the enacted tax rate in future periods
how do we calculate the tax expense for Financial reporting?
we take the current tax liability and Add any DTL and subtract any DTA
Deferred Tax Expense is the
net change during the year in DTA and DTL
DTL is equals to
Future tax amount X tax Rate
