What is Deferred tax

Question

Accepted Answer

Deferred tax is a liability or asset that arises due to temporary differences between accounting and tax rules.

Deferred tax is recorded on the balance sheet as a liability or asset.
It is caused by differences in the recognition of revenue, expenses, or assets between accounting and tax rules.
Deferred tax liabilities arise when taxable income is lower than accounting income, resulting in higher taxes in the future.
Deferred tax assets arise when taxable income is higher than accounting income, resulting in lower taxes in the future.
Examples of temporary differences include depreciation methods, inventory valuation, and revenue recognition.
Deferred tax is calculated using the tax rate expected to apply when the temporary differences reverse.
It is important for financial reporting and tax planning purposes.

Accepted Answer

Deferred tax are basically of two types deferred tax asset & liability, the former means future tax benefits a company can use to reduce its tax burden while the latter means future tax obligations that arise from temporary difference that is payable in future

What is Deferred tax

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