4. Temporary versus Permanent Differences

f. distinguish between temporary and permanent differences in pre-tax accounting income and taxable income;

What are the two ways that the difference between accounting profit and taxable income are permanent? A revenue or expense item is recognized … 1. …for tax reporting but never for financial reporting 2. …for financial reporting but never for tax reporting

What are two ways that can create a temporary difference between accounting profit and taxable income? 1. Taxable temporary differences (TTD) - results in more taxes due in the future 2. Deductible temporary differences (DTD) - results in less taxes due in the future