Differed tax

What Does Deferred Tax Liability Mean?

An account on a company's balance sheet that is a result of temporary differences between the company's accounting and tax carrying values, the anticipated and enacted income tax rate, and estimated taxes payable for the current year. This liability may or may not be realized during any given year, which makes the deferred status appropriate.

In othe words …..!!!!!!!!!!!!!!!!!

Because there are differences between what a company can deduct for tax and accounting purposes, there will be a difference between a company's taxable income and income before tax. A deferred tax liability records the fact that the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.

Whenever there is a difference in tax payable as per income tax and books of A/c. we have to create DTA or DTL.

When in the current year profit as per account is more that is profit as per tax is less so we have to pay Income tax less and have to pay in future...................i.e,in current year there must be some exp. like depriciation more allowed in IT but less transferred in acc....................in such case we have to create DTL

DTL and DTA is just bookish entry to balance tax amount as per IT and Acc.