A deferred tax liability arises when:

A Too much tax is paid

B Taxable income is temporarily less than pretax financial income, creating future tax obligations

C There is a permanent difference

D Tax rates decrease

✓ Correct Answer: Option B

DTL: temporary differences where tax deductions now exceed book deductions (e.g., accelerated depreciation), creating taxes payable later.

💡 Why is B) the correct answer?

The correct answer to the question "A deferred tax liability arises when:" is Option B: Taxable income is temporarily less than pretax financial income, creating future tax obligations.

The other options — A) Too much tax is paid, C) There is a permanent difference, D) Tax rates decrease — are incorrect for this CPA Exam Prep question. As explained above: DTL: temporary differences where tax deductions now exceed book deductions (e.g., accelerated depreciation), creating taxes payable later.

📚 About This CPA Exam Prep Practice Question

This 3-level CPA Exam Prep question from the Financial Accounting (FAR) topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CPA Exam Prep practice test or use flashcards for spaced repetition review.

Practice CPA Exam Prep Quizzes → Browse All Questions Study Flashcards

A deferred tax liability arises when:

✓ Correct Answer: Option B

📚 About This CPA Exam Prep Practice Question

Related CPA Exam Prep Questions