Question

Differentiate between “loss carryback” and “loss carryforward.” Which can be accounted for with the greater certainty when it arises? Why?

Short answer

The two essential provisionsunder the Internal Revenue System are loss carryback and carryforward. Since it helps the organization in decreasing their income tax payable amount paid to the government.

Step-by-step solution

Differentiating between loss carryback and loss carryforward

Basis	Loss carryback	Loss carryforward
Meaning	This provision allows the organization to settle its present net operating loss with the previous income tax expense to receive a refund.	This provision allows the company to offset its net operating loss with the following income tax expense to decrease the total taxable amount for the future year.
Duration	It can be adjusted up to 2 previous years.	It can be adjusted for up to the next 20 years.

Greater certainty

The carryback loss is often accounted for with greater certainty when the amount increases since the organization calculate and knows its total taxable amount applicable in previous years. On the other hand, the future taxable income cannot be predetermined by the firm.