Question

If you look at income according to the tax return, and income according to the corporation's books, they:

Will often be different because tax and book income/loss are calculated differently.

Should always be the same.

Will never be the same if the shareholder was paid wages correctly.

Should have the same figures for depreciation.

Answer 1

Income according to the tax return and income according to books of account are often be different because, income as per income tax return calculated by applying rules and procedures specified in income tax laws. where as income as per books of account is calculated by applying specific accounting policies selected and consistently used by that corporation.

Also theses differences can be classified as permanent differences and temporary differences.

So Option 1 is Correct.