Solution By Steps

Step 1: Tax Expense

The amount of tax that relates to activity that occurred during the current accounting period. This amount appears on a company’s income statement.

Step 2: Taxes Payable

Calculated by multiplying a company’s applicable income tax rate by its taxable income. It can be found on the company’s tax return and is the amount of taxes actually owed to the government.

Step 3: Deferred Taxes

Arise from a temporary difference in the timing between recognizing the tax expense for a given period on the financial statements compared to actually filing and paying the taxes per the tax records.

Final Answer

Tax Expense: The amount of tax that relates to activity that occurred during the current accounting period. This amount appears on a company’s income statement.

Taxes Payable: Calculated by multiplying a company’s applicable income tax rate by its taxable income. It can be found on the company’s tax return and is the amount of taxes actually owed to the government.

Deferred Taxes: Arise from a temporary difference in the timing between recognizing the tax expense for a given period on the financial statements compared to actually filing and paying the taxes per the tax records.

Key Concept

Tax Accounting

Key Concept Explanation

Tax accounting involves the calculation and management of taxes within a company’s financial records, including tax expense, taxes payable, and deferred taxes. Understanding these concepts is crucial for accurate financial reporting and compliance with tax regulations.