Answer Posted / jejeswara reddy
The need for deferred tax accounting arises because companies often postpone or pre-pays taxes on profits pertaining to a particular period.
1.deferred tax Liability
2.deferred tax asset
1.deferred tax Liability: There may be a difference in the way certain items of expense are allowed to be treated for tax purposes and how a company actually treats them.
Tax laws allow full depreciation in the first year after a company acquires certain assets. However a company may actually write off the depreciation over several years on its financial statements. The company may charge depreciation at lower rates than allowed under tax laws. Or it may use a different method of charging depreciation.
2.deferred tax asset: The tax laws may not recognize some of the expenses that a company has accounted for in its accounts. For instance, provisions made at the discretion of the management, such as those for bad debts, which are not fully recognized by tax authorities.
In such cases, a company is actually pre-paying taxes pertaining to future years. For the year, the profits that the taxman calculates would be higher than those computed by the company. Therefore a company would save on tax in the years when the expenses or provisions actually materialize.
Adjusting for a deferred tax asset :
There are two classifications for a deferred tax asset:
1. Expense:
a. Is a bonifide GAAP expense today
b. It is not a tax deduction today
Is NOT subtracted from the cash flow calculation
2. Revenue
a. Not a bonifide GAAP expense today
b. It is however taxable income.
Subtracted from the cash flow calculation
| Is This Answer Correct ? | 0 Yes | 0 No |
Post New Answer View All Answers
What is meant by Cost of Improvement?
What are the Treatment & Implications in interstate sales transactions if party is unregistered dealer & having Exemption Certificate or exempted.
Need of Bank Reconciliation to a company
I had filed e-filling IT Return for A.Y.2011-12 before 1yr but yet I have not get Refund & not seen refund status at on income tax site now I filed e-return for A.Y. 2012-13 now what i do for refund A.Y. 2011-12?
in case of vehicle hired for staff pick up & drop for 1 month or 1 year, TDS is applicable ? if yes then which code is mention in challan & which rate is applicable ? in case of vehicle orner is personal or company which rate applicatble ?
who will able to deduct the tds
Suppose there is a computer Inst. providing a course abc and the total fees for it is Rs.10000 per annum, now this institute gives the right to another institute to provide facility of that course on behalf of it and the fees amt. is bifercated to Regd. fees Rs. 2500, Exam fees Rs.500 and tution fees Rs.7000,now the former institute gives right to later ins. to take Rs.7000 and says that the amt. of regd. fees and Exam fees i.e Rs. 3000 must be given to it plus service tax, now we have to save the former ins. from paying service tax on Amt. 3000, how can we do this?
What is FBT? Is there any fixed rate of tax for all? or slab rate? pls give the detailed answer with examples. My e- mail ID: vijji_tv@yahoo.com
What is the WCT percentage under which the amount is being deducted in Punjab. Under what Notification and dated when???????????. Serious Senor I need the answer other wise I would not have posed this question; Please send the answer to the mail address.
What are the various forms used for VAT?
How treat TDS & TCS in manual or Tally 9 softwere ?
Pl give the abstract details of Karnataka VAT Payment procedure, rebating, returns filing in connection of manufacture, distributer & retailer.
What is cenvat credit?
what is the case assesment of sales tax and vat.What is the proof of this case assesment.why we use the challan-c...???? Plz tell me someone...???
How will you calculate house rent allowance (hra)?
