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Intermediate Accounting (Kieso)
Found in: Page 1092

Short Answer

Explain the difference between pretax financial income and taxable income.

Income is a term used when an organization earns money for the products and services offered to sell in the potential market to its customers. Without a regular income, an organization cannot survive in the market.

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Step by Step Solution


Pretax financial income and taxable income are two of the most critical terms used in income tax. They both are responsible for accumulating the total income tax expense for the given financial year.



Pretax financial income

Taxable income


The organization earns this type of income before the inclusion of income taxes.

The finance department calculates this type of income to compute the income tax expense.

Reported under

It is reported under the income statement of an organization.

It is reported under the income tax return statement of the company.

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