Which of the following will not result in a temporary difference? Select one: a. Advance rental receipts b. Product warranty liabilities c. Installment sales d. Goodwill amortization
correct option is "d"
Temporary difference is a difference that arises in one period and reverses in next or future periods .Say for example ,some expenses are deductible for accounting purpose in current period but for tax purpose same is deductible on cash basis in future period .
Advance rental receipts | Revenue is deferred for accounting purpose but taxable when received for tax purpose | Temporary |
Product warranty liabilities | Expensed in current period for accounting purpose but for tax purpose ,same is deductible when paid | Temporary |
Installment sales | Revenue is recorded for accounting purpose but taxable when received for tax purpose | Temporary |
Goodwill amortizatio | Not deductible for tax purpose unless there is impairment of asset | Permanent |
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