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When we prepare a set of financial statements we use a whole raft of accounting policies that (are supposed to!) result in a profit or loss figure that gives a true and fair view of the performance of the company for that year.
Then we have to calculate a different profit for the tax man - one based not on the policies that best fit our company, but on tax laws designed to make the system more uniform and less prone to, shall we say, the vagaries of opinion.
Most commonly (in the UK at least) this means that depreciation is disallowed and instead we are given Capital Allowances in their place. The two figures will rarely match.
Where this means that the profit we declare in the P&L is higher than the profit we will be paying tax on, we have to charge what is called Deferred Tax.
This is an application of the matching (or accruals) and prudence concepts. In the long term the two profits (declared in the P&L and charged to tax) will be equal. If we think we've made more profit than we have been taxed on so far then it is both prudent and proper* to recognise a charge (or credit - remember the effect is cumulative and Deferred Tax is shown as a liability in the Balance Sheet) in this years accounts for the tax we know is eventually going to have to be paid.
*Proper because we think that the tax charge we will incur in the future actually belongs to profits we made now - this is the accruals concept.
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Is deffered tax liability your current liability?
yes
What is deferred tax?
Deffered Tax is the amount the payment of which you delayed to pay in future. There are many reasons for deffered taxation. There are so many expanses and incomes which are not allowed by taxation department of Government but we enter as income and expenses in our financial statements because in accounting they are allowed as income or expense and that's why in the end the net income calculated by company and tax department is rearely reconsile due to problems mentioned above and due to that tax calculated by company is different the tax calculated by tax departments that's why deffered taxation is use to adjust tax between entity and tax department.
Do you have to use the same depreciation for accounting and tax?
Tax department has developed theire own depreciation schedules for different assets class and use their own depreciations rather than using accounting depreciation and due to this accounting depreciation difference there is also difference in tax we pay and tax we calculate and called "Deffered Taxation"
What happened to deffered tax on winding up of a company. has this amount is paybale to government?
Deferred tax, which is a GAAP accounting concept, and may be either an asset or a liability, would all be settled, either paid with or reduce tax, on the final return.
How you Calculate Provision for Income tax?
how to calculate provison for income tax
Is deffered tax liability your current liability?
yes
Who impose the ceiling in tax deffered in annuity?
IRS
What is defering?
Deffered Tax is the amount the payment of which you delayed to pay in future. There are many reasons for deffered taxation. There are so many expanses and incomes which are not allowed by taxation department of Government but we enter as income and expenses in our financial statements because in accounting they are allowed as income or expense and that's why in the end the net income calculated by company and tax department is rearely reconsile due to problems mentioned above and due to that tax calculated by company is different the tax calculated by tax departments that's why deffered taxation is use to adjust tax between entity and tax department.
What is deferred tax?
Deffered Tax is the amount the payment of which you delayed to pay in future. There are many reasons for deffered taxation. There are so many expanses and incomes which are not allowed by taxation department of Government but we enter as income and expenses in our financial statements because in accounting they are allowed as income or expense and that's why in the end the net income calculated by company and tax department is rearely reconsile due to problems mentioned above and due to that tax calculated by company is different the tax calculated by tax departments that's why deffered taxation is use to adjust tax between entity and tax department.
Do you have to use the same depreciation for accounting and tax?
Tax department has developed theire own depreciation schedules for different assets class and use their own depreciations rather than using accounting depreciation and due to this accounting depreciation difference there is also difference in tax we pay and tax we calculate and called "Deffered Taxation"
What happened to deffered tax on winding up of a company. has this amount is paybale to government?
Deferred tax, which is a GAAP accounting concept, and may be either an asset or a liability, would all be settled, either paid with or reduce tax, on the final return.
How you Calculate Provision for Income tax?
how to calculate provison for income tax
With respect to prepaid income from services is the treatment of prepaid income the same for tax and financial accounting?
No - for financial accounting it is treated as deffered income (included in income when earned) and for tax perposes it is income in the year received.
How do you calculate builders cot sales tax?
how do you calculate builders cot tax
What is deffered taxation?
Deferred tax is an accounting concept, meaning a future tax liability or asset, resulting from temporary differences between book (accounting) value of assets and liabilities and their tax value, or timing differences between the recognition of gains and losses in financial statements and their recognition in a tax computation
how do you calculate your ira for tax time?
how do you calculate your ira on tax time how do you pat taxes on a ira
Is deferred tax a current liability?
Yes deffered tax liability is created due to difference in taxable income as well as actual income which needs to be adjusted in next fiscal year as it is for only one year that;s why it is current liability.
