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CMA Intermediate · Financial Accounting · Accounting for Taxes on Income (AS 22)

Under AS 22, the divergence between taxable income and accounting income arises mainly because of:

The divergence arises for two reasons: items considered as revenue, expenses or deductions for tax purposes differ from those in the statement of profit and loss, and the amount of a given item recognised in the accounts differs from the amount recognised for computing taxable income.

  1. ADifferences in items treated as revenue, expenses or deductions for tax purposes, and differences in the amount of an item recognised in the statement of profit and loss versus that used for taxable incomeCorrect
  2. BDifferences between the tax rate and the dividend rate declared by the enterprise
  3. CDifferences between the balance sheet date and the due date of filing the return
  4. DDifferences arising only from foreign exchange fluctuations

Explanation

AS 22 gives two reasons: items of revenue and expense differ in nature between the accounts and tax law, and the amount of a particular item recognised in accounts differs from the amount recognised for computing taxable income. The other options are not reasons stated in the Standard.

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