
Concept explainers
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
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- no aiOne company might depreciate a new computer over three years while another company might depreciate the same model computer over five years...and both companies are right. True Falsearrow_forwardno ai An asset's useful life is the same as its physical life? True Falsearrow_forwardno ai Depreciation Expense reflects an allocation of an asset's original cost rather than an allocation based on the economic value that is being consumed. True Falsearrow_forward
- The purpose of depreciation is to have the balance sheet report the current value of an asset. True Falsearrow_forwardDepreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return. True Falsearrow_forwardDont use AI Give soln.arrow_forward
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