Question

During their first year of operations, Ajax Company has a temporary book-tax difference that results in pre-tax accounting income greater than taxable income. The correct accounting would result in a

Question 9 options:

	deferred tax asset.
	deferred tax liability.
	Neither a deferred tax liability nor asset.

Answer 1

Q.1 During their first year of operations, Ajax Company has a temporary book-tax difference that results in pre-tax accounting income greater than taxable income. The correct accounting would result in a

Answer : option 1 is correct. Deferred tax asset.

Items on a company's balance sheet that may be used to reduce taxable income in the future are called deferred tax assets. The situation can happen when a business overpaid taxes or paid taxes in advance on its balance sheet. These taxes are eventually returned to the business in the form of tax relief. Therefore, overpayment is considered an asset to the company. A deferred tax asset is the opposite of a deferred tax liability, which can increase the amount of income tax owed by a company.