Valuation Account for Deferred Tax Assets
>> January 13, 2012
To know valuation account for deferred Tax Assets is not difficult but for this, you have to know deferred tax assets, liabilities and valuation account. After this, you can easily understand the meaning of valuation account for deferred tax assets.
1. What is Deferred Tax?
Every assessee has to pay income tax on the taxable income which he or company has earned in previous year. This taxable income is calculated through making of profit and loss account. But there are lots of expenses which are not accepted by income tax authorities. For example depreciation which is calculated through fixed Instalment method is not accepted by tax authority. So, if company has paid tax according to his accounting rules. He will adjust his calculated profit according to tax law. Difference of this will either payable tax in future or receivable in future. This will be deferred Tax.
2. What is Deferred Tax Liability?
If tax is payable in future due to above 1. reason, it will be deferred tax liability. For example, we paid tax after adjustment of provision for doubtful debt but it did not happen in future. So, this adjustment will be cancelled and we have to pay tax on this provision for doubtful debt. This tax liability will be our deferred tax liability.
3. What is Deferred Tax Assets?
If tax is receivable in future due to above 1. reason, it will be deferred tax liability. For example, we paid tax after adjustment of provision for doubtful debt but it did not happen in future. So, this adjustment will be cancelled and we have to pay tax on this provision for doubtful debt. This tax liability will be our deferred tax liability.
4. What is Valuation Account?
Valuation account is an account which is used for bringing any asset on its current value instead of book value. For example provision for doubtful debt account is valuation account because it is helpful for bringing debtor account on its current value instead of its book value.
5. What is Valuation Account for Deferred Tax Assets?
Now, we reach to define valuation account for deferred tax assets. This account is also helpful for bringing deferred tax assets at its current value. Following example will explain it clearly.
1. What is Deferred Tax?
Every assessee has to pay income tax on the taxable income which he or company has earned in previous year. This taxable income is calculated through making of profit and loss account. But there are lots of expenses which are not accepted by income tax authorities. For example depreciation which is calculated through fixed Instalment method is not accepted by tax authority. So, if company has paid tax according to his accounting rules. He will adjust his calculated profit according to tax law. Difference of this will either payable tax in future or receivable in future. This will be deferred Tax.
2. What is Deferred Tax Liability?
If tax is payable in future due to above 1. reason, it will be deferred tax liability. For example, we paid tax after adjustment of provision for doubtful debt but it did not happen in future. So, this adjustment will be cancelled and we have to pay tax on this provision for doubtful debt. This tax liability will be our deferred tax liability.
3. What is Deferred Tax Assets?
If tax is receivable in future due to above 1. reason, it will be deferred tax liability. For example, we paid tax after adjustment of provision for doubtful debt but it did not happen in future. So, this adjustment will be cancelled and we have to pay tax on this provision for doubtful debt. This tax liability will be our deferred tax liability.
4. What is Valuation Account?
Valuation account is an account which is used for bringing any asset on its current value instead of book value. For example provision for doubtful debt account is valuation account because it is helpful for bringing debtor account on its current value instead of its book value.
5. What is Valuation Account for Deferred Tax Assets?
Now, we reach to define valuation account for deferred tax assets. This account is also helpful for bringing deferred tax assets at its current value. Following example will explain it clearly.
You might like:
1 comments:
please give example for deferred tax asset
Post a Comment