Answer / shanmuk

As per Accounting Standard AS-22deferred Tax Means the
difference between Book Income (Say as per Companies
Act,1956)& Taxable Income (Income Tax Act,1961).Defferd Tax
may leads to Deffered Tax Asset (DTA) or Deffered Tax
Liability (DTL).

Where Book Income More than Taxable Income result in DTL.
Where Book Income Less than Taxable Income result in DTA.

Basic Reasons for Deffer ed Tax :
1.Depreciation is Per Books is Less than as per Income Tax
result in DTL.

1. DTA

DTA ----- Dr XXX
To P/L A/c XXX

2. P/L A/c --- Dr XXX
To DTL --- XXX

Answer / guest

Income for financial statement purposes is determined under
generally accepted accounting principles as set forth by the
accounting profession. Income for tax purposes is determined
according to the rules of the Internal Revenue Service which
are passed into law by Congress (Thought the same rules
applied with other contries). These rules often do not
follow generally accepted accounting principles.
Accordingly, differences will arise between accounting
income and taxable income.

These differences may be either temporary or permanent in
nature. Temporary differences are referred to as “timing
differences” because, with time, they reverse or “turn
around”. Permanent differences are forever—they do not
reverse. In this post we are going to discuss the temporary
differences.

Temporary differences involve the recognition of revenue or
expense items in one year for tax purposes but in a
different year for accounting purposes. Overall the total
income is the same for both tax and accounting purposes; it
is just the timing that is different.
Amit Kumar

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