Dear Concern Team,

please explain the deferred tax and liability in the accounting view and who is it journal entry and what a effect at financial statement Balance sheet and PL

It’s the tax impact of the difference between your financial statements (accounting rules) and tax return (tax rules).

Deferred Tax Asset (DTA): Future tax benefit due to overpayment or timing difference

Deferred Tax Liability (DTL): Future tax payment due to underpayment or faster deductions now

Accounting View:

Example:

• You charge depreciation as Rs. 10,000 in books, but tax allows Rs. 15,000.

• That’s a temporary difference of Rs. 5,000.

* Taxable profit is lower now, so you’ll pay more tax later.
* That creates a Deferred Tax Liability.

JOURNAL ENTRY : Deferred Tax Liability:

Dr. Income Tax Expense A/C                  Rs. 1,250  

     Cr. Deferred Tax Liability A/C              Rs. 1,250  

(Being deferred tax liability created due to (reason) difference)

JOURNAL ENTRY : Deferred Tax Asset:

Dr. Deferred Tax Asset A/C                   Rs. 1,250  

     Cr. Income Tax Expense A/C                   Rs. 1,250  

(Being deferred tax asset recognized due to (reason) difference)

(Here Rs. 1,250 = Rs. 5,000 difference × 25% tax rate)

Effect on Financial Statements: