Hi,
What exactly does one mean by Deferred Tax? I read definations on internet but could grasp the concept 100%.
I was reading balance sheet of one company and they are including it in Shareholder's equity? Is that correct n why?
Please dont flame, im trying to learn accounting myself as this is not my field.
It is a line item in the Balance Sheet
If deferred tax liability then it is to be shown as under
| I. | SOURCE OF FUNDS |
| SHARE HOLDERS FUND | |
| Share Capital | |
| Stock option outstanding account | |
| Reserves & Surplus | |
| LOAN FUNDS | |
| Secured Loans | |
|
|
Deferred Tax Liabilities (net) (Refer note no.___ of Schedule 23) |
| II. | APPLICATION OF FUNDS |
| Fixed Assets | |
| Gross Block | |
| Less: Accumlated Depreciation | |
| Net Block | |
| INVESTMENTS | |
| CURRENT ASSETS, LOANS & ADVANCES | |
| Inventories | |
| Sundry Debtors | |
| Cash & Bank Balances | |
| Other Current Assets | |
| Loans & Advances | |
| LESS: CURRENT LIABILITIES & PROVISIONS | |
| Current Liabilities | |
| Provisions | |
| NET CURRENT ASSETS | |
| Miscellenous expenditure | |
| (To the extent not written off) | |
|
|
Deferred Tax Assets (net) (Refer note no.___ of Schedule 23) |
Thanks & Regards,
Sunil
Thx Sunil, but another stupid question. When we calculate debt to equity ratio, do i include deferred tax liability in equity?
thx
to my mind
NO
& in general also people do not include the same
Hi Akshay
If you understand what a liability is, then Deferred Tax Liability is very similar to any other liability. It is that tax liability which will not be paid immediately, but rather delayed and paid later. Such delay is attributable to differences in income tax provisions.
It is not a reserve (as in part of profits), and hence should not be included in Equity for Debt Equity Ratio.
Rineesh
CA Suraj Garg & Associates
New Delhi
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