Concepts of Accounting Profit, Taxable Profit and Temporary Difference
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Concepts of Accounting Profit, Taxable Profit and Temporary Difference
Question Description
Please read the financial statements (balance sheet, income statement, cash flow statement) and notes attached to financial statements on income tax issues very carefully. Please remember some aspects of your firm’s treatment of its tax – can be a very complicated area, particularly for some firms. Based on your understanding of the topic “accounting for income tax” and based on your reading of the collected annual reports, do the following tasks.
i Briefly explain the concepts of accounting profit, taxable profit, temporary difference, taxable temporary difference, deductible temporary difference, deferred tax assets and deferred tax liability.
ii Briefly explain the recognition criteria of deferred tax assets and deferred tax liability.
iii What is your firm’s tax expense in its latest financial statements?
iv Is this figure the same as the company tax rate times your firm’s accounting income? Explain why this is, or is not, the case for your firm highlighting the reasons for differences.
v Identify the deferred tax assets/liabilities that is reported in the balance sheet articulating the possible reasons why they have been recorded.
vi Is there any current tax assets or income tax payable recorded by your company? Why is the income tax payable not the same as income tax expense?
vii Is the income tax expense shown in the income statement same as the income tax paid shown in the cash flow statement? If not, why is the difference?
viii Briefly explain the concepts of temporary difference and permanent difference. Identify any permanent differences that your company may have.
ix What do you find interesting, confusing, surprising or difficult to understand about the treatment of tax in your firm’s financial statements? What new insights, if any, have you gained about how companies account for income tax as a result of examining your firm’s tax expense in its accounts?
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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