Which of the Following Statements Explains Timing Differences for Tax

question 36

Multiple Choice

Which of the following statements explains timing differences for tax and financial accounting? i.Income is recognized in one period for tax and in another period for financial accounting.
Ii) Income is recognized for accounting but not for tax purposes.
Iii) Expenses not deductible for tax purposes are deductible for financial accounting.
Iv) An expense is deducted currently for tax but in a later period for financial accounting.

• A)i.only
• B)i.and ii.
• C)i.and iv.
• D)ii.and iii.

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Definitions:

Demand Deposits

Bank accounts that allow the holder to withdraw funds without prior notice, such as checking accounts.

Time Deposits

Savings accounts or certificates of deposit that hold a fixed sum of money for a specified period of time, during which the depositor cannot withdraw the funds without penalty.

Required Reserves

The minimum amount of reserves a bank must hold as mandated by regulatory authorities, based on a percentage of the bank's deposit liabilities.

Demand Deposits

Bank accounts from which money can be withdrawn at any time without any notice to the bank.