Question

List three differences between financial accounting revenue/expense and taxable revenue/expense. Then write the reason why you think Congress mandated those differences.

Answer 1

The main difference accounting revenue and expenses and taxable revenue and expenses are as follows :-

1. All accounting revenues and expenses are recorded when they are accrued and when organisation is liable to pay.

2. all taxable revenues and expenses are recorded only when they are received and paid.

3. In accounting records record all provisions and reserves which leads to decrease in profit.

4. In taxable records we don't record all these reserves and provisions due to this we can observe more profit compared to accounting records.

5.In accounting records depreciation at the rate of we wish. So that it leads to increase or decrease in depreciation values and asset value.

6. In taxable record the depreciation rate was fixed by the governing act or so that we can maintain a stable and consistent depreciation rates to all our assets in the organisation.

Reasons for making this differences mandatory is as follows :-

1. the accounting records should represent financial position with all earnings other than all earnings received or accrued.

2 tax records fruit show the earning capacity of the company and the tax to be paid on on the earned income.

3. exceptional question of the company will be calculated including reserves and provisions reserves and provisions in records.

4. Tax cannot be paid on the amount calculated including reserves and provisions.

So these differences will be mandatory for the financial reporting.

These are all the information about the given question.

I hope, all the above mentioned points and explanations are useful and helpful to you.

Thank you.