What is the Deferred Tax & which cercumtences it shows in Assets or Liability?

Question

How Deferred Tax Accounted

Answer 1

A deferred tax is a temporary difference between taxable income and book income that will be reversed in future periods. A good example is accelerated depreciation taken for tax purposes. Eventually the difference between book and tax depreciation will be reconciled when the asset is fully depreciated, hence it being referred to as temporary.

Accelerated depreciation for tax purposes is an example of a deferred tax liability. This is because it causes taxable income to be less than book income (because of the increased deduction). Therefore, you are playing less tax currently, and will have a greater tax liability in the future. A temporary difference that results in taxable income greater than book income in the current period is a deferred tax asset.

The financial reporting standard concerned with the above under U.S. GAAP is FAS 109.

Answer 2

Taxes payable are always listed as a liability.