Deferred Tax

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T K Ganesan (Querist)
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29 September 2009 A company has been incorporated in 2005. up to the y/e 31.03.2008 the company was creating deferred tax liability as the book profit is more than tax profit due to high rate of depreciation. the company has only fixed assets for calculating deferred tax. till 31.03.2008 the accumulated deferred tax liability has came to Rs. 19114/-. as the company has not purchased any new assets till date, first time tax profit has exceeded the book profit and i have arrived at deferred tax of Rs. 30,855/-. what the entry should i pass?
according to me :-
Deferred Tall Liability A/c Dr
To Profit & Loss A/c.
As i have credit balance of Rs. 19114/- in deferred tax liability a/c, the balance as on 31.03.2009 ubnder deferred tax asset will be Rs. 11711/-. i.e Rs. 19114 - 30,855. is my entry is correct. one of my friend says that, first i have to debit D T L and credit P & L for Opening bal of Rs. 19,114/-. after that i hav to debit DTA & Credit P & L for Rs. 30,855 for current year. which one is correct?

Kaustuv

Kaustuv (Expert)
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05 October 2009 Para 29 of AS-22 reads as follows:-

29. An enterprise should offset deferred tax assets and deferred tax liabilities if:

(a) the enterprise has a legally enforceable right to set off assets against liabilities representing current tax; and

(b) the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

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