Question

Interest paid by a corporation is a deductible operating expense, hence it decreases the firm’s taxes. A. True B. False

Answer 1

True (A)

Step-by-step explanation:

Interest paid which is also known as finance cost is deductible from operating income which reduces profit before tax i.e tax base and hence, reduces company tax liability.

Interest on loan is an allowable deduction in arriving at company taxable income unlike dividend which is not allowed.