interperiod income tax allocation

Dictionary of Accounting Terms for: interperiod income tax allocation
interperiod income tax allocation

temporary difference between years in which a transaction affects taxable income and accounting (book) income. Temporary differences originate in one period and subsequently reverse in another. The differences result from four types of transactions, as follows: (1) income included in taxable income after being included in book income (e.g., installment sale); (2) expenses deducted for taxable income subsequent to accounting income (e.g., warranty expense is deducted for book purposes in the year of sale but for tax purposes when paid); (3) income recognized for tax purposes prior to being included for accounting purposes (e.g., rental received in advance); and (4) expenses subtracted for taxable income before being deducted for accounting purposes (e.g., accelerated depreciation method for tax and straight-line depreciation for books).

Dictionary of Business Terms for: interperiod income tax allocation
interperiod income tax allocation

timing difference between years in which a transaction affects taxable income and accounting (book) income. Temporary differences originate in one period and subsequently reverse in another.

Copyright (c) by Barron's Educational Series. Reprinted by arrangement with the publisher of this site.