Chapter 19, Problem 2CA

To determine

Asset – liability approach: A process of matching the incomes or gains or assets to the expenses or losses or liabilities is termed as asset liability approach. This approach is widely used by many organizations for recording their business activities.

• (a)

To understand: To understand the principles of asset-liability approach.

To determine

• (b)

Temporary differences: The difference between the actual taxable liability and the books of records maintained by the individual, firm or an entity is termed as temporary difference. The difference is created due to the tenure of transactions or actual performance of transactions, flow of funds into the business or changes in the value of the asset or liability due to business situations. These differences are adjustable in future when the appropriate time for the transaction arises.

To determine the temporary difference in the books of accounts.

To determine

• (c)

To determine the consequence of recording the deferred tax item in the balance sheet.