A Difference Between the Amounts of the Accounting Expenses and the Tax

question 9

Multiple Choice

A difference between the amounts of the accounting expenses and the tax deductions of a company which will be reversed in future periods indicates:

• A) unethical accounting practices
• B) a permanent difference
• C) a greater annual income tax expense
• D) a temporary difference

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Definitions:

Economic Profits

Economic Profits are the profit made by a company after deducting both explicit and implicit costs, representing the true profitability of the company.

Long Run

a period in which all factors of production and costs are variable, allowing firms to adjust all inputs.

Monopolistically Competitive

Describes a market structure where many firms sell products that are similar but not identical, allowing for product differentiation and some degree of market power.

Normal Profit

The minimum level of profit needed for a company to remain competitive in the market, equating to its opportunity costs.