Question

The amount of income taxes due to the government for a period of time is rarely the amount reported on the income statement for that period as income tax expense. Instructions (a) Explain the objectives of accounting for income taxes in general-purpose financial statements.

Short answer

The finance department prepares the income tax expense section under the income statement to estimate the amount of current and the deferred tax expenses of the organization.

Step-by-step solution

Introduction

Income taxes are a type of revenue for the country's government using which it launches various public welfare programs like hospitals, educational institutions, etc.

Objectives of accounting

(1) To estimate the amount of income tax payable for the organizations

(2) To determine any refund generation in case of excess tax the organization pays.

(3) To estimate the amount of deferred tax assets or liabilities recognized under the income tax expense financial statement