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…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 2,300+ — or go Pro for unlimited reps.
Pro unlocks every model answer — $19.99/mo.
More from Accounting & the 3 Statements
- What are the three financial statements and what does each show?
- Walk me through how a $10 increase in depreciation flows through the three statements (40% tax).
- How are the three statements linked?
- A company buys $100 of inventory on credit (no cash yet). Walk through the three statements.
- Why can a profitable company still run out of cash?
- What's the difference between cash-based and accrual accounting?
Try the real thing
1 / 3M&A & Merger Models
What makes an acquisition accretive or dilutive to EPS?
Superday coming up? Take the cheat sheet.
The technicals and stories to have cold before you walk in — free, one email, no mailing list.
Free tier: 20 cards + 10 daily reps + ALL drills — no credit card required.