6
Concepts
3
Formulas
1
Decisions
3
Quiz Questions
6 concepts covered in this module.
Accounting income follows GAAP/IFRS; taxable income follows tax law. Differences can be temporary or permanent.
Reverse over time. Taxable temporary diff → DTL. Deductible temporary diff → DTA. Example: accelerated tax depreciation.
Never reverse. Example: tax-exempt income, non-deductible expenses. Cause effective tax rate ≠ statutory rate.
Future tax benefit. Arises from deductible temporary differences or tax loss carryforwards. May need valuation allowance.
Future tax obligation. Arises from taxable temporary differences. May not reverse if company keeps growing.
Tax expense / Pre-tax income. Differs from statutory rate due to permanent differences, tax credits, etc.
3 essential formulas for this module.
Where: Income statement tax charge
Where: Actual rate after all adjustments
Where: Apply expected future tax rate
1 decision frameworks to guide your analysis.
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Taxable vs Accounting Income
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