Accounting Temporary and Permanent Transactions (Business Info)

(Credit):
--written by thewriter197
--employed by Ashford University



(Temporary Differences):

Income that is not included on the income tax return. Not all assets, liabilities, and revenues is included in the income tax return. Side money and temporary jobs, are not included on income tax returns year to year. So, they are considered to be temporary differences or short transactions. Contracts from small people and small under the table payments for little jobs are not included in the income tax return. In short, money and assets that is made outside a big corporation.

(Permanent Differences):

The opposite of temporary differences. They are the amounts of wage and the job payment made to an individual by work. It is also lease and rent receipts. Its, permanent transactions or long term payments made to a piece of land or corporation. Long term payments and long term amounts of payment. Organization start-up costs are also included as permanent differences.

(Temporary difference category):

[Revenue for financial purposes]: Earning from an investment. Some companies can invest in something and use it for financial gain only. Constriction sites often purchase material and sometimes sell material for temporary financial gain.
[Expenses not included on tax returns]: Some expenses are not included in income tax returns. These expenses are temporary difference. Litigation expenses and warranty cost are not included. Losses of business products are also temporary. Not included in tax return.

(Permanent difference category):

[Club Dues]: These transactions are recurring so they are permanent and put in the income tax return. Clubs like the gym, bar, party, airline, and hotel.
[Meals and entertainment]: These are considered permanent because humans have to eat. So, this is a recurring transaction from month to month. Entertainment  is also recurring like a Netflix subscription. So, transactions will be considered permanent difference.




Reference:

Putra, L. D. (2009, August). Temporary and permanent differences [accounting for income tax]. Retrieved from http://accounting-financial-tax.com/2009/08/temporary-and-permanent-differences-accounting-for-income-tax