Financial statement income different from taxable income

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• Why taxable income is not the same as financial net income

  A reader of financial statements should understand that the purpose of taxable income (and the resultant amount of tax to be paid) has a different motivation from the goals of financial statement income.

• Diff. between financial statement income & taxable income

  A taxpayer may have both financial statement income and taxable income. In fact the calculation of the taxable income starts from the financial statement income or loss as it is.

• Three Differences, Compute Taxable Income, Entry for Taxes for Zurich Company

  The following items cause taxable income to be different than pretax financial income. 1. Depreciation on the tax return is greater than depreciation on the income statement by $16,000. 2.

• Journal Entry to Record Income Tax

  The following items cause taxable income to be different than pretax financial income. 1) Depreciation on the tax return is greater than depreciation on the income statement by $16,000 2) Rent collected on the tax return is greater than rent earned

• Memo: Income Statement Change to Balance Sheet

  Sincerely, Anna Liza Gaspar ANSWERS MEMORANDUM Date: May 2, 2009 To: From: Subject: Changes Resulting from SFAS No. 109 - Accounting for Income Taxes The Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes

• Temporary Differences, Valuation Account, Entries and IS

  income(or loss) from 1999 through 2007 as follows.

• Depreciation Difference, Two Differences, Single Rate, etc.

  Prior to 2010, taxable income and pretax financial income were identical. Pretax financial income is $1,700,000 in 2010 and $1,400,000 in 2011. On January 1, 2010, equipment costing $1,200,000 is purchased.

• This addresses taxable & financial income & deferred assets.

  (1) There are differences between taxable and financial income because financial income is the amount that is used for investor analysis, whereas taxable income is the amount of income reported to the IRS that is considered taxable.

• Partnership and Corporate Taxation

  Also, the taxation of dividends is different and the tax rate structure is different. 3. For financial reporting purposes, the income tax expense is $600,000 (book income before tax) *.35 (the tax rate), or c. $210,000.