Accounting treatment of deferred tax-financial statement, Financial Accounting

Assignment Help:

Accounting treatment of deferred tax

The objective of accounting for deferred tax is to ensure that the profits for the period d onto fluctuate due to temporary differences. To achieve this objective, an account called deferred tax account is prepared upon which adjustments are made at the end of every financial period.

The approach is normally to compute the temporary differences. Thereafter we apply the corporation tax rate on the temporary difference to get the balance carried down in the deferred tax account. The balance carried down is compared with the balance brought down and the difference being the balancing figure in the deferred tax account represents a transfer to or from the profit and loss or income statement.

The transfer to or from the profit and loss is not debited or credited directly in the income statement but adjustments are made on the income tax expense whose net amount will now appear in the income statement.

The final figure for income tax expense that will appear in the income statement will be arrived as follows:-      

 

£

Current year estimated corporation tax

x

Add/(less) under cover provision of previous years tax

x/(x)

Add/(Less) transfer to (from) deferred tax account

x/(x)

                                             Income tax expense

   xx



In the balance sheet, deferred tax liability will be shown under NON-CURRENT LIABILTIES. Whereas a deferred tax asset will be shown under NON-CURRENT ASSETS.


Related Discussions:- Accounting treatment of deferred tax-financial statement

calculate a weighted average contribution margin per unit, Part A   ...

Part A   The contribution margin income statement of Nice Cup Company for 31 December 2011 follows: Nice Cup Company   Contribution Mar

our assumptions about consumer behavior, 5.    A stockholder named Sue mus...

5.    A stockholder named Sue must cast a vote for chair of the board. Sue prefers Mr. Lee to Ms. Doe, Ms. Doe to Mr. James, and Mr. James to Mr. Lee. a. Are Sue's preferences c

Define case study of a company that exports goods, Define Case Study of A C...

Define Case Study of A Company that exports goods? A company exports goods to country K. Your work as an international cash manager needs you to estimate the value of country K

Investment with ex. div. quotation-executorship laws, Investment with ex. d...

Investment with ex. div. quotation Investment with ex. div. quotation will be debited to the investment account at its ex. div. value. The full impending dividend will also

Describe accounting concept of a business combination, Describe the account...

Describe the accounting concept of a business combination. Business Combination: According to International Financial Reporting Standard-3 Business Combinations "A busi

Determine the increase in the nominal interest rate, Money demand in an eco...

Money demand in an economy in which no interest is paid on money is M d /P = 500 + 0.2Y - 1000i (a) Suppose that P = 100, Y = 1000, and i = 0.10. Find real money demand, nomi

Assignment, Can you do the attacched quections by Monday?

Can you do the attacched quections by Monday?

What amount of amortization expense, Day Corporation purchased a patent on ...

Day Corporation purchased a patent on January 1, 2012 for $360,000. The patent had a useful life of 10 years at that date. In January of 2013, Day successfully defends the patent a

Group structures-group accounts, GROUP STRUCTURES A group structure is ...

GROUP STRUCTURES A group structure is the relationship between the holding company and its subsidiaries.  There are normally four main types of group structures (apart from the

Credit control, Once credit has been extended it is vital to ensure that cu...

Once credit has been extended it is vital to ensure that customers abide by agreed terms of trade. Regular checks on customer accounts for instance using an aged receivables analys

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd