One Reason That Tax Accounting Rules Differ from Generally Accepted

question 13

Multiple Choice

One reason that tax accounting rules differ from generally accepted accounting principles is that:

• A) Taxpayers often tend to overstate income, and companies tend to understate income when reporting to shareholders.
• B) Taxes are rarely disputed, so there is less need for verifiability in tax rules.
• C) The tax code tries to follow the economic substance of transactions, but generally accepted accounting principles focus on their legal form.
• D) Congress has decided that some actions should not be rewarded by tax deductions, even though they may meet the accounting definition of expenses.

---

Definitions:

Empirical Rules

A set of guidelines that indicate how the data are spread in a normal distribution, specifically stating that approximately 68%, 95%, and 99.7% of the data fall within one, two, and three standard deviations from the mean, respectively.

Standard Deviations

A measure of the amount of variation or dispersion of a set of values, indicating how much the values differ from the mean.

Observations

Data collected or noticed during an experiment or study, often referring to the individual data points or recorded occurrences.

Empirical Rules

Generalizations based on observations and experience rather than theory, often used in statistical analysis.