Deferred Tax Liability
This query is : Resolved
25 February 2008
What is deferred tax liability?
How to do accountis for it?
How to do accountis for it?
25 February 2008
If on account of some tax cocession shown an organisation is able to postpone the tax liability such postponed liability will have to be parked under deferred liability rather than be taken as reserves. The liability so notionally created is called deferred tax liability.
26 February 2008
AS THE NAME SUGGEST IT IS DEFFERMENT OF TAX LIABILITY.IF ANY EXPENSE IS NOT ALLOWABLE FULLY/PARTLY IN ACCOUNTS BUT FULLY ALLOWABLE UNDER THE INCOME TAX ACT DUE TO ITS NATURE ,THAN TO THE EXTENT IT IS MORE ALLOWABLE UNDER THE INCOME TAX WILL CREATE A LIABILTY IN THE SUCCEEDING YEARS WHEN THAT PORTION WILL BE ALLOWABLE UNDER THE ACCOUNTS.
26 February 2008
Deffered tax liability means currently you are paying less amount of tax as per IT but in future you have to pay more so for this timing difference we have to create a deffered tax liability in our books of accounts accoding to the virtual certainty that in future company will earn sufficient proft to recover it.
for deffererd tax liability the entry will be
Profit & loss a\c dr
To Deffered tax liability
for deffererd tax liability the entry will be
Profit & loss a\c dr
To Deffered tax liability
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