Identify and Explain Three Examples of Deductible Temporary Differences

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The Answer is Deductible temporary differences give rise to a future tax asset whereby less tax is payable in the future.-Provisions such as annual leave,long- service leave and warranties In each of these an accounting provision is made as the liability accrues,but a tax deduction is only given when payment is made.This gives rise to a future tax saving; that is,less tax will be paid in the future.-Unearned revenue received and rent received in advance Here tax is paid when the cash is received and therefore no tax has to be paid in the future when the accounting profit is recorded with an adjusting entry; that is,there is a future tax saving as the tax has already been paid.-Accounts receivable with an allowance for doubtful debts For accounting purposes a provision for doubtful debts is made against accounts receivable,resulting in a doubtful debts expense when calculating accounting profit.For tax purposes a deduction is only allowed when the account proves to be uncollectible.This means that less tax will be paid in the future.

Identify and Explain Three Examples of Deductible Temporary Differences

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