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      Question

      Which of the following reduces a company’s taxable

      income immediately (current tax) but increases deferred tax liability?
      A Depreciation for tax higher than book depreciation (accelerated tax depreciation) Correct Answer Incorrect Answer
      B Provision recognised in books but not deductible for tax Correct Answer Incorrect Answer
      C Revenue recognised for tax but not in books Correct Answer Incorrect Answer
      D Member contribution to provident fund Correct Answer Incorrect Answer

      Solution

      Higher tax depreciation reduces current taxable income (lower current tax payable). However, it creates a taxable temporary difference because the book value of the asset is higher than its tax base, leading to a Deferred Tax Liability (DTL).

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