Question

Taxable income of a corporation can differ from pretax financial income because of: a. Both Temporary and Permanent differences b. Neither Permanent nor Temporary differences c. Permanent but not Temporary differences d. Temporary differences but not Permanent differences

Answer 1

a. Both Temporary and Permanent differences.

Step-by-step explanation:

• The pretax financial income is used to determine the amount of the tax payable to the government and pretax financial income is the income that is used to determine the financial income of expenses.

• The taxable income is used to determine the amount of the tax paid to the government.

To calculate the pretax income use the formula

• Earning Before Tax as equal to the Operating Income minus the Interest Expense and the

• Pretax Income formula = Profit After Tax (PAT)+ Tax Expenses.