FS and Deferred Tax_Deferred Tax Liability

Deferred Tax
Tax on the temporary (Timing)differences between the AP and TP
• DT = Tax Rate * Temporary difference
• DT is accounting adjustment to show the temporary difference

Accounting for Tax and Financial Statements
• In the IS
o Divide tax into two components
• Current Tax (IT)
• Deferred Tax (temporary differences)
• In the CFS
o Payment: Current tax paid
• In the BS
• Deferred Tax Liability, or
• Deferred Tax Asset