Contrast deferred tax liabilities and deferred tax assets. Give examples of each. Also respond to another...

Contrast deferred tax liabilities and deferred tax assets. Give examples of each. Also respond to another student's post. Write two to three large paragraphs

Expert Solution

Deferred tax asset is an accounting term that refers to a situation where a business has overpaid taxes or taxes paid in advance on its balance sheet. These taxes are eventually returned to the business in the form of tax relief, and the over-payment is, therefore, an asset for the company. A deferred tax asset can conceptually be compared to rent paid in advance or refundable insurance premiums; while the business no longer has cash on hand, it does have comparable value, and this must be reflected in its financial statement.

A deferred tax liability is an account on a company's balance sheet that is a result of temporary differences between the company's accounting and tax carrying values, the anticipated and enacted income tax rate, and estimated taxes payable for the current year.

This liability may be realized during any given year, which makes the deferred status appropriate.

Because there are differences between what a company can deduct for tax and accounting purposes, there is a difference between a company's taxable income and income before tax. A deferred tax liabilityrecords the fact the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.

ekkarill92 answered 2 years ago

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Contrast deferred tax liabilities and deferred tax assets. Give examples of each. Also respond to another...

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