Question

The valuation allowance account that is used in conjunction with deferred taxes relates: Multiple Choice Only to income taxes receivable due to net operating loss carrybacks. Only to deferred tax liabilities. To both deferred tax assets and liabilities. Only to deferred tax assets.

Answer 1

Answer:

The correct answer is D

Explanation:

Valuation allowance is the contra- account to the account of deferred tax asset and it shows the deferred tax asset amount with 50% probability (which is more than that) of not being used in future because the non- availability of future taxable income.

And the valuation allowance account in relation to the deferred tax relate only to deferred tax assets as it is an accounting term on the balance sheet of the firm which is used to state that firm has overpaid on taxes and some form of tax relief is due.