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Accelerated Depreciation and Deferred Tax Allocation

Journal of Accounting Research 1968 6(2), 262
Firms which elect to use accelerated depreciation for tax purposes while using straight-line for reporting purposes have only one approved method for recording the difference between book tax expense and the tax liability.' This method relies on a deferred credit account in which the difference between the tax expense (calculated using straight-line depreciation) and the actual tax paid is recorded. The reported net income resulting from this procedure is the same as it would have been if straight-line depreciation were taken for tax purposes. Tax allocation is considered an extension of accrual accounting to include` taxes. The logical grounds for such inclusion are laid in the classification of taxes as expense items.