Home » Temporary vs. Permanent Tax Differences in Financial Accounting financial accounting

Temporary vs. Permanent Tax Differences in Financial Accounting financial accounting



This video discusses the difference between a temporary tax difference and a permanent tax difference. Tax differences arise because “book income” (income computed for financial reporting purposes, according to GAAP) is different from “tax income” (income computed for purposes of calculating the amount of corporate income tax due). Temporary tax differences reverse over time, whereas permanent tax differences never reverse. For example, the IRS allows U.S. firms to accelerate their depreciation deductions. This often results in firms front-loading the depreciation expense of an asset (taking more depreciation in the early years of the asset, and less depreciation in the later years of the asset). This difference is only temporary, however, as the same total amount of depreciation is taken for both book and tax purposes. Thus, the difference is merely one of timing, and it reverses itself over time. Permanent tax differences never reverse. An example of a permanent tax difference is the proceeds from a life insurance policy. Life insurance proceeds are not taxable so they will never appear in taxable income. Life insurance proceeds do appear in book income, however, so this creates a permanent tax difference (it does not reverse in a later period).

See also  Project of Business analytics on P & G Ltd. #cpimr #p&g p&g finance
See also  OCBC Personal Financial Consultant financial consultant

This video was funded by a Civic Engagement Fund grant from the Gephardt Institute for Civic and Community Engagement at Washington University in St. Louis.

Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD.
Edspira’s mission is to make a high-quality business education accessible to all people.

SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS & OTHER FREE GUIDES
*

MICHAEL’S STORY
*

LISTEN TO THE SCHEME PODCAST
* Apple Podcasts:
* Spotify:
* Website:

CONNECT WITH EDSPIRA
* Website:
* Instagram:
* LinkedIn:
* Facebook:
* Reddit:
*TikTok:

CONNECT WITH MICHAEL
* LinkedIn:
* Twitter:
* Instagram:
* Snapchat:
*TikTok:

HIRE MCLAUGHLIN CPA
* Website: .

Images related to the topic financial accounting

Temporary vs. Permanent Tax Differences in Financial Accounting

Temporary vs. Permanent Tax Differences in Financial Accounting

Search related to the topic Temporary vs. Permanent Tax Differences in Financial Accounting

#Temporary #Permanent #Tax #Differences #Financial #Accounting
Temporary vs. Permanent Tax Differences in Financial Accounting
financial accounting
See all the latest ways to make money online: See more here
See all the latest ways to make money online: See more here

Related Posts

26 comments

sweetnspicyayisha 10/09/2021 - 2:15 PM

Great job! Thank you for explaining this topic.

Reply
R S 10/09/2021 - 2:15 PM

Sir, amazing. You are the best accounting tutor. Love your stuff.

Reply
Nitin Bhalla 10/09/2021 - 2:15 PM

Ind AS 12

Reply
Laksahan Shadeesha 10/09/2021 - 2:15 PM

Wow this is great explaintion sir.

Reply
TheSeven 10/09/2021 - 2:15 PM

Shout out Edspira. You have carried me through literally 60% of my classes in college

Reply
Andrea 10/09/2021 - 2:15 PM

your examples are hilarious

Reply
Jo S. 10/09/2021 - 2:15 PM

Taking corporate tax online class and this summed up half of a chapter that was confusing the hell out of me. You're very good at explaining.

Reply
Omar K 10/09/2021 - 2:15 PM

You're good

Reply
Elsa Morales 10/09/2021 - 2:15 PM

Thank you so much for making the concept so easy to understand…

Reply
Tarek Alsherif 10/09/2021 - 2:15 PM

You are always amazing in the explanation, thank you
Keep it up!
Best regards

Reply
ezatullah saibay 10/09/2021 - 2:15 PM

Thank you for uploading these series of videos, it made life much more easier. Specially the examples are amazing!

Reply
Niclas Bauer 10/09/2021 - 2:15 PM

Really good video (s)! Thank you!!

Reply
J. B.J. 10/09/2021 - 2:15 PM

You're amazing!! Thank you so much!!

Reply
nirpa bk 10/09/2021 - 2:15 PM

I want the tax accounting and timing

Reply
Eugenia Druzhinina 10/09/2021 - 2:15 PM

Thank you so much for all your help!!! Would not be able to go thru UCLA without your videos!!!

Reply
Robert Z 10/09/2021 - 2:15 PM

SO Good THX

Reply
Ahmed Mostafa 10/09/2021 - 2:15 PM

you sir are amazing, keep doing your good work.
You explain things in a super clear way that is interesting and not at all boring.

Reply
Lau S. 10/09/2021 - 2:15 PM

OMG this video saved me so much time!!!THANKS A LOT!

Reply
John Huang 10/09/2021 - 2:15 PM

You are literally saving my grade right now in my accounting course.

Reply
GhoulsUniteTV 10/09/2021 - 2:15 PM

why did u subtract the 12,000 from 20,000 to get 8,000?
shouldnt u subtract the straight line 12,000 -20,000 to get -8000

my question is basically shouldnt u subtract book by tax?

Reply
Asiful Talukder 10/09/2021 - 2:15 PM

helped a lot sir, sitting for the corp.accounting exam soon. thank you

Reply
Monica 10/09/2021 - 2:15 PM

How did those amounts under tax depreciation column come about? Are they just a given number or is there a calculation for the accelerated method of accounting for depreciation?

Reply
Rodney Eyberg 10/09/2021 - 2:15 PM

Really love your videos! I can not thank you enough.

Reply
Tele Vision 10/09/2021 - 2:15 PM

Thank you! I LOVE your videos!

Reply
Chris Speights 10/09/2021 - 2:15 PM

Can you explain why depreciation is a DTL item? Is it because the government wants to encourage firms to invest? Thanks.

Reply
Milca B 10/09/2021 - 2:15 PM

Could you please do a video on Deferred Tax Asset and Liability? Thanks.

Reply

Leave a Comment