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      Question

      A 'Deferred Tax Asset' is created

      when:
      A Accounting profit is more than Taxable profit. Correct Answer Incorrect Answer
      B Accounting profit is less than Taxable profit. Correct Answer Incorrect Answer
      C The company pays dividends. Correct Answer Incorrect Answer
      D The company issues bonus shares. Correct Answer Incorrect Answer
      E A loan is repaid before maturity. Correct Answer Incorrect Answer

      Solution

      When taxable income is higher than accounting income (due to timing differences), the company pays more tax now, creating an asset for the future.

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