@sillipanda: not really..:-( i am having soar throat , drinking warm orange juice and day quil at work. Howz your prep going? So how are you managing AUD & FAR?
Today's plan –
Lunch – read ninja notes (inventory)
7-12 pm – Working capital and MCQs , and listen to Inventory's becker lecture.
@hustin: computation of taxable income (for tax returns) diifers form the net income under GAAP . this difference is known as permanent difference or temporary difference .
Temporary difference- the timing of income & expense varies
eg tax allows MCRS dep method whereas gaap allows straight line or reducing dep . that creates temporary difference between taxable income(TI) and Net income (NI).
Permanent difference – difference recognized for income tax purpose is never recognized under GAAP.
For example we deduct TAX penalties In NI but on TI it’s never deductible, which creates permanent difference.
Temporary difference creates deferred asset & Liabilities on B/S
Deferred asset : TI> NI for example company makes provision for bad debt and NI is reduced , whereas in taxable income we will reduce actual bad debt therefore TI> NI = Deferred taxes which will reduce future tax expenses.
TI = 300
NI = 200
Tem diff – 100
Intact tax rate – 40%
Deferred asset = Ti>NI = 100.*40= 40 – this $40 will reduce our future tax expense .
(Deferred liabilities) : NI > TI . We recognized tax relief in NI . For example we accrued revenue whereas in TI we only tax revenue when received.
TI – 100
NI – 150
Tem diff – NI> TI (50)
Def liablaity – 50*.40= ($20) will increase our future tax expense
This create Deferred liability under GAAP which will increase our Future tax expense under GAPP financial stat.
hope it makes sense ha ha ha ha
happy Monday & happ studying FAR fam!!!
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