Topic: Accounting for Income TaxCan you please help explain tax bases for assets and liabilities under temporary difference (between accounting income and taxation income)? Would be so helpful if you could simplify what tax bases mean. I'm confused why, in the second page, the tax bases are considered 0 and I'm not sure what that means. Thanks! carryinguntingod andwhichincomeitem'sncome.D:renceiningryingcled.rarynt inn theed orTax base15The tax base of an asset or a liability is the amountattributable to the asset or liability for tax purposes.Worded in another way, the tax base of an asset or a liabilityis the amount of the asset or liability that is recognized orallowed for tax purposes.Tax base of an assetnand congrsa od ceThe tax base of an asset is the amount that will be deductiblefor tax purposes against future income.10For example, if an entity has appropriately capitalizedP1,000,000 as software development cost, the carryingamount is P1,000,000 for accounting purposes.URUSAmoo if this amount is allesHowever, if this amount is allowed as a one-time deduction ?for tax purposes, the tax base is zero because the entireamount is expensed in the current year, why zero?Tax base of a liabilityThe tax base of a liability is normally the carrying amountless the amount that will be deductible for tax purposes in thefuture.fase co01100 90 26For example, if an entity has recognized an estimatedwarranty liability of P500,000, the carrying amount isP500,000 for accounting purposes.However, an estimated warranty cost is deductible only whenactually paid.. bastito523Thus, the tax base is zero because the estimated warrantycost is a future deductible amount.ben7161 timing differencesVS. tax baseCarrying amountof an asset/liabilityTemporary differencesTemporary differences are differences between the carryingamount of an asset or liability and the tax base.Temporary differences include timing differences.Timing differences are differences between accountingincome and taxable income that originate in one period andreverse in one or more subsequent periods.dosyaTiming differences are items of income and expenses whichare included in both accounting income and taxable incomebut at different time periods.For every temporary difference, eventually that item'streatment will be the same in accounting and taxable income.Accordingly, temporary differences give rise either to:a. Deferred tax liabilityb. Deferred tax assetwoot eatKinds of temporary differencea. Taxable temporary difference is the temporary differencethat will result in future taxable amount in determiningtaxable income of future periods when the carryingamount of the asset or liability is recovered or settled.522b. Deductible temporary difference is the temporarydifference that will result in future deductible amount indetermining taxable income of future periods when thecarrying amount of the asset or liability is recovered orsettled.Tax baThe ta:attributWordedis the aallowedTax b.The ta:for taxFor exP1,000amourHowefor taamouTaxThe tless t.futurFor.warrP50CHowactuThucost

Tax base is something which is used in Income tax purposes. Tax base can be in the form of Asset…

Topic: Accounting for Income Tax Can you please help explain tax bases for assets and liabilities under temporary difference (between accounting income and taxation income)? Would be so helpful if you could simplify what tax bases mean. I'm confused why, in the second page, the tax bases are considered 0 and I'm not sure what that means. Thanks!

Topic: Accounting for Income Tax Can you please help explain tax bases for assets and liabilities under temporary difference (between accounting income and taxation income)? Would be so helpful if you could simplify what tax bases mean. I'm confused why, in the second page, the tax bases are considered 0 and I'm not sure what that means. Thanks!

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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