The 'Deferred Tax Asset' arises when: MCQ with Answer and Explanation

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The 'Deferred Tax Asset' arises when:

A. Accounting income is more than taxable income

B. Tax rate increases

C. Accounting income is less than taxable income

D. Income tax is refunded

Answer: Option C

Solution (By JKSSB Mock Tests)

Deferred tax asset is recognized when accounting profit is lower than taxable profit due to timing differences, resulting in future tax savings.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

Wages paid for the erection of a new boiler should be debited to:

A. Trading Account

B. Wages Account

C. Boiler (Machinery) Account

D. Repairs Account

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Correct Answer: Option C

Explanation:
Capitalizing erection costs is required under standard accounting principles, so it is debited to the specific asset account.

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Question #2

Which of the following statements best describes the 'Money Measurement Concept'?

A. Only profitable transactions are recorded.

B. All transactions and events are recorded in terms of money.

C. Only cash transactions are recorded.

D. All assets are recorded at market value.

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Correct Answer: Option B

Explanation:
The money measurement concept states that only those transactions which can be expressed in monetary terms are recorded in the books of accounts.

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Question #3

Closing stock is valued at:

A. Cost Price or Market Value, whichever is higher

B. Cost Price or Market Value, whichever is lower

C. Market (Net Realizable) Value

D. Cost Price

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Correct Answer: Option B

Explanation:
Based on the principle of conservatism (prudence), inventory is valued at Cost or Net Realizable Value (Market Value), whichever is less.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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