Deferred Tax Assets

Please explain how it works with example.
Replies (3)
Quick Summary
This discussion explains how Deferred Tax Assets (DTAs) are created, using a practical example for the 2017-18 financial year. It highlights the difference between book depreciation and tax depreciation, which leads to a temporary difference in taxable profit. This difference results in a DTA being recognised in the company's accounts.

Deferred  Asset  for 2017-18

Example 

particulars                                                 As  per  Books  Accounts         As per  Income Tax        

 profit  after  expenses but  before 

    Depreciation                                                                80,00,000                                   80,00,000     

 (-) Depreciation                                                              15,00,000                                   10,00,000            Difference                   5,00,000    

     Profit before  Tax                                                        65,00,000                                   70,00,000           Difference                   -5,00,000

    Income   Tax @ 30%                                                  19,50,000                                    21,00,000           Difference                  -1,50,000       

 

  Now , following  entries  will be pass in the Books of Accounts 

1)   profit & Loss                 A/c  Dr                                  21,00,000

      To  provision for  Income Tax   Ac Cr                                              21,00,000     

(  provision for  Income tax ) 

 

 2)  Deferred    Tax  Asset   A/c  Dr                                    1,50,000

      To  Profit  &  Loss         A/c   Cr                                                       1,50,000       

(  here ,we have created deferred tax asset  for  2017-18 )                              

 

Thank you 👍
Click below link for complete information with practical calculation

https://youtu.be/RGpQldmfuHw

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