Deferred Tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 May 2011 Please clarify, what is deferred Tax? and how it creates? how we pass the accounting entries and when we should recognised DTA/DTL??

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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13 May 2011 Details are given hereunder:-
1.Source:-
AS-22 deals with deferred tax.
2.Focus;-
It is based on the matching concept.
3.Reason:-
Accounting income and taxable income may differ on account of various reasons.
4.Measurement;-
The difference as aforesaid is itemized and permanent differences are eliminated. The rest is called timing difference.
5.Timing difference;-
Those differences which lead to either saving in tax or payment of tax in the current year in the manner that such saving or payment is nullified in later years.
6.Recognition;-
Deferred tax should be recognized for all timing differences subject to consideration of prudence in respect of deferred tax assets.
7.Rates;-
deferred tax is to be recognized using the tax rates that have been enacted on the balance sheet date. If not enacted can be measured on the tax laws that have been substantially enacted as on the b/s date.
8. Positioning;-
deferred tax asset/liability should be disclosed separately from current assets and current liabilities in the b/s.
9.Disclosure;-
In the notes on accounts compliance of AS 22 may be mentioned as well as the workings of the deferred tax may be given.

Querist : Anonymous

Querist : Anonymous (Querist)

13 May 2011 HOW WE MAKE THE ENTRIES IN BOOKS OF ACCOUNTS, IF THERE WAS DTL IN PREVIOUS YEAR AS WELL??

Pankaj Gandhi Jaiswal

Pankaj Gandhi Jaiswal (Expert)
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05 June 2011 Deferred Tax is the mechanism of alignment of tax on book profit instead of taxable profit and in this allignment if difference come Deferred tax will be credited/debited accordingly DTA & DTL will be recognised

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