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Fa - deffered tax liabilities

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Fa - deffered tax liabilities

  1. 1. Deferred Tax Liabilities<br />Presented By:<br />JOEL M PAIS<br />MBA - 2011Aloysius Institute of Management and Information Technology (AIMIT)<br />
  2. 2. Definition<br />A tax liability that a company owes and does not pay <br />at that current point, although, it will be responsible <br />for paying it at some point in the future. This is often <br />caused by a difference in a company's balance sheet, <br />due to the differences between accounting practices <br />and tax regulations. Occasionally, a company will <br />have a difference in their taxable income and income <br />before tax due to these differences, resulting in a <br />Deferred tax liability.<br />
  3. 3. Explanation<br />Deferred tax liability is responsibility for taxes that are owed, but not yet paid. <br />There are certain circumstances in which companies or taxpayers may incur tax liability but not pay the taxes right away. <br />They record this as a liability on their accounts so that they have a more complete picture of their finances. <br />High deferred tax liability can indicate that a person or company is using unusual accounting practices and can be a cause for concern.<br />
  4. 4. Journal entries<br />    <br />   Income Tax Expense                 20,000<br />       Deferred Tax Asset                     4,000<br />          Income Taxes Payable            24,000<br />