Explain: financial accounting & tax accounting are separate?
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1. What does it mean when we say that financial accounting and tax accounting are separate?
2. What are the implications?
3. How does this apply to the United States?
4. Should they be separate or the same?
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Solution Summary
This solution is 361 words and gives you ideas about why financial accounting measures of profits differ from taxable income and whether they should be the same or not.
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1. What does it mean when we say that financial accounting and tax accounting are separate?
Financial accounting and tax accounting measure income in completely different ways. So, firms must record their transactions using either financial or tax rules and then use worksheet to convert their books to the other method. When I was in real estate, we kept the book on a cash basis to comply with tax rules and cash flow monitoring then converted to GAAP for quarterly reporting. Firms ...
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