So You think that Taxable Income = Taxes Payable?

I'm sure none of you were taken by surprise of the not so clever title .

For a corporation's bookkeeping, taxable income never equals tax payable.

There are differences in the bottom line of accounting income and taxable income. Not all the expenses permitted by the CICA handbook and GAAP recognition are legitimate deductions from taxable income.

Two main differences include

1. Temporary Differences: occurs in one period and then reveres itself out in subsequent periods. Example of this is depreciation, warranty costs, bond discounts or premiums etc. The depreciation method used by the corporate entity may not match the CCA reporting requirement for amortization to generate the entities taxable income.
2. Permanent Differences: the item enters into the reconciliation of taxable income in one period, but does not create future income tax. Examples of these include 50% of meals and entertainment (only 50% are tax deductible), golf memberships (o% are tax deductible), dividends received by a Canadian Corporation from another Canadian Corporation.