Question

Which of the following describes a temporary difference?

1) A difference that will be corrected in an amended tax return.
2) A difference arising from an uncertain tax position.
3) A fundamental difference in what constitutes revenue or expense for GAAP and tax purposes.
4) A timing difference between the recognition of revenue or expense under GAAP and tax purposes.

Answer 1

A temporary difference in tax accounting refers to a timing difference between the recognition of revenue or expense under GAAP and tax purposes.

Step-by-step explanation:

A temporary difference in tax accounting refers to a timing difference between the recognition of revenue or expense under Generally Accepted Accounting Principles (GAAP) and tax purposes. Temporary differences occur when an expense or revenue is recognized for tax purposes in a different period than for financial accounting purposes. For example, if a company incurs an expense this year for financial accounting purposes but is not allowed to deduct it until the following year for tax purposes, a temporary difference arises.