Examples of temporary differences would be as follows:
1. Unearned revenue received in 19A and recognized for tax purposes this year, but not recognized for accounting purposes until earned in 19B
1. Unearned revenue received in 19A and recognized for tax purposes this year, but not recognized for accounting purposes until earned in 19B
2. Accrued expenses recognized in 19A for accounting purposes but not recognized for tax purposes until paid in 19B
3. Revenue from installment sales recognized totally in 19Afor accounting purposes, but recognized gradually over several years under the installment method for tax purposes
4. Straight-line depreciation used for accounting purposes while an accelerated method is used for tax purposes
5. Warranty costs recognized in 19A for accounting purposes before they actually occur (using estimates), but not recognized until paid for tax purposes
6. Percentage-of-completion method for construction contracts used for accounting purposes while the completed-contract method is used for tax purposes
7. Expenditures for prepaid items in 19A deducted completely this year for tax purposes, but amortized gradually for accounting purposes
We’ve seen in the past that the standard entry to record income taxes has been:
Dr. Income Tax Expense xxx
Cr. Income Tax Payable xxx