Example: writeen down value of fixed assets as pert accounts-200
         writeen down value as per tax                      150

please privide the soluision by giving effects in the profit and loos accounts and balance sheet. The company going to introduce deferred tax in first time

Hi,

Dear

There will be a timing difference and it will have differed tax liability.

Assuming the tax rate is 30%.

The Differed Tax Liability will be $15 i.e., ( 200-150)*30%

Now the entry will be:

Profit & Loss              DR .                  15                  

Differed Tax Liability    CR.                   15  

The income is 50 more under accounting income, thus it is a deferred tax
liability

50 will be shown as expense in P&L as Deferred tax & the same  amount will
be shown as libility in the B/S, which will get reversed, next year.

The difference is of 50, in

Krishnendu

Just to clarify – if the deferred tax is being computed under IAS 12, then treatment might differ from AS 22.

I presume that we are talking about timing differences in which case the deferred tax will be computed based on the difference between the account base and tax base and the resulting deferred tax asset/liability will be computed using the enacted tax rate.

In this case there will be a deferred tax liability and the journal would be

Dr Deferred tax expense (50 * tax rate)
Cr Deferred tax liability (50 * tax rate)

If this is part of first time adoption then the income entry will be taken to retained earnings in the opening balance sheet.

Sorry Krishnendu, you are incorrect. The Differed tax liability will be the tax on the difference of 50 with the enacted rate rather than the total difference.

So, if the enacted rate is 30% then DTL wl be 15 and not 50

So the difference is 50 and into(x) tax rate (effective tax rate assume 10%), then the DTL is 5.
 
Dr income statement 5
Cr DTL (Balance sheet) 5
 
(Assumed this is the first year)
 

Related Posts

1. DEFERRED TAXATION
2. Termination provisions
3. Exceptional Items vs. Extraordinary Items
4. Budget
5. Capitalization of WIP
6. Deferred Tax calculation
7. Deferred Taxes
8. IAS-12
9. Treatment for revaluation of land
10. Please guide on this