2. For each of the differences listed explain the difference in plain English by making up...

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2. For each of the differences listed explain the difference in plain English by making up...

2. For each of the differences listed explain the difference in plain English by making up an example. Also explain why it is temporary. See example below

	Plain English description	Why is this temporary	Is this difference currently favorable to the taxpayer?
Depreciation	The equipment is depreciated straight-line for book purposes, but under accelerated depreciation (MACRS) for tax purposes	Although tax depreciation is higher this year, in future years book depreciation will be higher. By its nature, accelerated depreciation means that depreciation deductions go down each year	Yes. The annual depreciation deduction is higher than depreciation expense. This results in lower taxable income and lower taxes actually paid this year.
Gain
Bad debt expense
Warranty expense
Deferred compensation

business accounting

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	Plain English Description	Why is this Temporary	Is this difference currently favorable to the taxpayer?
Depreciation	The equipment is depreciated straight-line for book purposes, but under accelerated depreciation (MACRS) for tax purposes	Although tax depreciation is higher this year, in future years book depreciation will be higher. By its nature, accelerated depreciation means that depreciation deductions go down each year	Yes. The annual depreciation deduction is higher than depreciation expense. This results in lower taxable income and lower taxes actually paid this year.
Gain	The excess of revenue over expenditures	In some year, due to some circumstances, the expenditure incurred may be high and gains may be less	Yes. As this will result in incresed stock price of the company
Bad debt expense	When a debtor is unable to pay his/ her obligation	A debtor may be sued and part of the amount may be recovered from his estate.	Yes. As one gets the deduction of bad-debt for taxation purposes
Warranty expense	When cost is incurred on a product which is under warranty	Warranty expenses may or may not happen depending on the circumstances of the cases.	Yes. As one gets the deduction of warranty expenses for taxation purposes
Deferred compensation	When compensation cost is incurred due to revision in wages.	Deferred compensation may or may not happen depending on the circumstances of the cases.	Yes. As one gets the deduction of deferred compensation for taxation purposes

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