Deferred taxes

Filed Under: Taxation

A business accounting concept. Income for tax purposes must always be calculated and taxes paid in accordance with the rules set out in the Income Tax Act. However, businesses’ methods of calculating their income for financial statement purposes often differ from those used for tax purposes, and thus companies’ income for financial statement purposes will often differ from (and appear greater than) the income on which businesses actually have to pay taxes. In order to reconcile these two amounts in their books, businesses use the accounting concept of deferred taxes.

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