[altosal]

Under what circumstances is a deferred tax asset recorded? 1. When a difference is reversed by a transaction causing taxable income to be less than financial income, 2. When a difference is reversed by a transaction causing financial income to be less than taxable income, 3. When a transaction results in a difference causing taxable income to be less than financial income or 4. When a transaction results in a difference causing financial income to be less than taxable income. This is confusing.

[Just Looking]

I actually think you know this one. Think of the problems you just did. The warranty expense was deducted for the financial statement, but isn't deducted for the tax return - causing the financial statement income to be less than the taxable income. The depreciation was less on the financial statement than the tax return, causing the financial income to be greater than the taxable income. Which one caused a deferred tax asset vs. a deferred tax liability?

[altosal]

When a transaction results in a difference causing financial income to be less than taxable income.

[Just Looking]

Right.

[altosal]

I hope.

[altosal]

I don't see how this is suppose to prepare me for my exam, by the time I'm done my brain will be mush and won't be able to sit the exam. However, I will persevere.

[altosal]

Thanks for your help. By the way, are you a professor? Looking forward to another round soon. I have to be at work for 7:30am it's 1:45am. Speak to you later.

[Just Looking]

I get the feeling you know this better than you think. Sometimes there are just so many words that you just have to take a deep breath and not panic. With accounting problems, I think it's about taking things a step at a time and not getting overwhelmed with all the info. Plus, a good night's rest will do wonders. :)

No, I'm not a professor, but I do enjoy helping and training people. I'm a CPA with 6 years experience working for public accounting firms. Part of my job is training the new accountants and other staff in our firm.