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Evaluate the following statement: For most business entities, book income differs from taxable income because “income”...

Evaluate the following statement: For most business entities, book income differs from taxable income because “income” has different meanings for the users of the data in the income computation.

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Answer #1

The statement is true since book income includes the income recorded as per the accounting records prepared by the entity, however there are various expenses which are not deductible by income tax act has to be disallowed, then taxable will differ in that case from the book income.

Also, Depreciation rates used to be different as per the income tax act and as per the companies act, in that case also, taxable income and book income will differ.

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