A Liability Is Incurred When Income Is Earned Because Income

question 158

True/False

A liability is incurred when income is earned because income tax expense is created by earning income.

---

Definitions:

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits.

Auditor

A professional who examines and verifies a company's financial statements and records to ensure accuracy and compliance with regulatory standards.

Financial Statements

Formal records of the financial activities and position of a business, individual, or other entity, including the balance sheet, income statement, and statement of cash flows.

Operating Activities

The portion of a company's business activities that are related to its main operations, such as selling products or offering services.