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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 because of 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.
Permanent difference: Constant mismatch between the actual taxable income and the books of records maintained by the individual, firm or an entity is termed as permanent difference. The difference is created either by including a transaction in the books of records and not in the taxable income or included in the taxable income but not in the books of record because of business situations. These differences are not adjustable in the future, and it remains the same.
To determine whether the statement has temporary difference or permanent difference.
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Chapter 19 Solutions
INTERMEDIATE ACCOUNTING-NEXTGEN ACCESS
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