Accounting & the 3 Statements
A company has book pre-tax income of $0 but pays cash taxes. Then later it has book income but pays no cash tax. Give a single mechanism that explains both.
Model answer
Temporary differences flipping direction — classically deferred revenue / unearned income that's taxed on cash receipt. Year 1: it collects cash that's TAXABLE on receipt but not yet recognized as…
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