Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

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Multiple Choice

Which of the following book–tax basis differences results in a deductible temporary difference?

Depreciation expense is higher for tax purposes than for financial reporting purposes.

Revenue is recognized for tax purposes before it is recognized for financial reporting purposes.

Prepaid expenses are deducted for tax purposes before they are recognized for financial reporting purposes.

Accrued expenses are recognized for financial reporting purposes before they are deductible for tax purposes.

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Verified step by step guidance

Understand the concept of deductible temporary differences: These occur when an expense or loss is recognized in financial reporting before it is deductible for tax purposes, leading to future tax benefits.

Analyze the given options: Each option represents a book-tax basis difference. Determine whether the timing difference results in a future tax deduction (deductible temporary difference).

Option 1: Depreciation expense is higher for tax purposes than for financial reporting purposes. This creates a taxable temporary difference, not a deductible one, because it results in higher taxable income in the future.

Option 2: Revenue is recognized for tax purposes before it is recognized for financial reporting purposes. This creates a taxable temporary difference, as it leads to higher taxable income in the current period and lower taxable income in the future.

Option 4: Accrued expenses are recognized for financial reporting purposes before they are deductible for tax purposes. This creates a deductible temporary difference because the expense will reduce taxable income in the future when it becomes deductible.