RSM320H1 Chapter Notes - Chapter 18: Canada Revenue Agency, Deferred Tax, Income Tax
Document Summary
A major consideration for new companies is the tax rate that will be paid on their profits. Corporations file income tax returns that are administered by the canada revenue agency (cra) The purpose is to raise money to support government operations. Accounting income (or profit) is a pre-tax concept: determined according to ifrs or aspe, objective is to provide useful information to users of the financial statements. Taxable income is a tax accounting term: determined according to the income tax act and regulations, used to determine income tax payable. To determine taxable income, companies prepare a reconciliation of accounting income to taxable income: Taxable income current tax rate = taxes payable and current income tax expense. Taxable income is determined by starting with accounting income, and adjusting it for reversing/temporary and permanent differences in the year. Reversing differences are treated the same for books and tax, but in different periods: relate to income statement differences.
