Why accounting income is different from taxable income.
- Some income of capital nature e.g. capital gain is not taxable but it is part of accounting profits.
- Accounting profits are determined after deducting depreciation but from taxable income, we deduct capital allowances.
- Some accounting expenses are not allowable for tax purposes e.g. general provision for bad debts, capital loss, some legal fees etc.
- Released and unrealized profits – for tax purposes, we recognize realized foreign exchange
gains/losses but accounting profits recognize both realized and unrealized gains (losses).