What is deferred tax
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
06 January 2012
dear...............
what is deferred tax ( asset/liability)
pls explain me urgently
what is deferred tax ( asset/liability)
pls explain me urgently
06 January 2012
There may be a difference between Profit shown in Profit and loss acoount and Taxable PROFIT. It can be due to exemptions, lower deductions, higher deductions etc. There are two types of differences:
a. Permanent - which nevers changes like exemtptions.
b. Timing - which gets reversed or ironed out over time like depreciation or an expense not allowed in one year but allowed in subsequent year.
Deferred tax is computed on timing differences or we can say due to timing differences tax payment gets deferred.
This is a simple explanation of deferred tax.
Now, let's says due to timing difference an entity will have to pay lower amount of tax in subsequent years. Then such a notional amount will be treated as "Deferred Tax Asset" in balance sheet and "Deferred Tax Income" in P/L.
Deferred tax does not impact actual tax payments !!
a. Permanent - which nevers changes like exemtptions.
b. Timing - which gets reversed or ironed out over time like depreciation or an expense not allowed in one year but allowed in subsequent year.
Deferred tax is computed on timing differences or we can say due to timing differences tax payment gets deferred.
This is a simple explanation of deferred tax.
Now, let's says due to timing difference an entity will have to pay lower amount of tax in subsequent years. Then such a notional amount will be treated as "Deferred Tax Asset" in balance sheet and "Deferred Tax Income" in P/L.
Deferred tax does not impact actual tax payments !!
Guest
Guest
(Expert)
08 November 2012
please read my article on "deferred tax entries" published here & became popular articles
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