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2 pages/≈550 words
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Level:
APA
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
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Topic:

Treatment of Deferred-Tax as Asset, Liability & Accounting (Essay Sample)

Instructions:

This project consists of two main parts:
a. Well-crafted, carefully-documented answers to the questions related to MD&A and the
Financial Statements posed below. These answers should always make reference to any relevant
section(s) on the FASB codification. Any calculations, journal entries, etc. should be clearly
labelled and explained. Please prepare your responses as if you are explaining the issue to
someone who is not an accountant.
b. Two additional questions you create related to any aspect of MD&A and/or the financial
statements. Feel free to be creative. Be sure to provide well-crafted and carefully-documented
answers to your questions with appropriation citation to the FASB codification, etc. (i.e., same as
above criteria) to the questions you pose.

source..
Content:

TREATMENT OF DEFERRED TAX AS AN ASSET AND LIABILITY AS WELL AS ACCOUNTING FOR COMPENSATIONS
Tax expense:
A deferred tax assets in an asset to the balance sheet that was overpaid by a firm. On the other had a liability represent what a company has not paid but ought to have paid (Laux, 2013). As an asset, would select rest as the company had made a pre-payment. Interest expense is a liability to the firm and thus not been paid thus deferred liability.
Deferred assets as earlier indicated means that a firm has made an over payment of tax and thus should be given a tax relief (Laux, 2013). An example is the rent that was paid before it was due. This mean that in preparation of the income statement, rent will have been paid in advance and thus increases the taxable income. This means that a portion of the tax that will be paid will be for an expense that is not used and is intended to be used in another period. And thus should appear as an asset in the balance sheet. Consequently, appearing as deferred tax since its tax that has already been paid for an expense not used.
As for the case of deferred tax liability, a firm has not cleared a debt that is already accrued (Laux, 2013). Therefore, appears in the expense section of the income statements. And thus reduces the amount of taxable income. This will thus mean, that there is a portion of tax, which should be paid in the current period that will not be paid and thus increases a firm liability. Hence appears as a liability in the balance sheet. This is to say, that it is an accrued tax that should be paid but is not paid thus the firm own to its payment.
The valuation allowance indicates the amount offset for deferred tax. The company puts it forwards at this point due to the high impact it has on a company net income. This is because lack of offset leads to negative income due to the large figure at the expense level.
Footnote 12:
Administration and selling expenses include all expenses a firm incurs in its attempt to realise revenue and to push their products and services (Brüggen & Zehnder, 2014). Therefore compensation expenses are included as part of the SG&A (selling, general & administrative expenses) since it is an expense in line of revenue realisation. SG&A include all non-production expense incurred by a firms. Therefore, directly or indirectly, firms may incur cots which are all summed up to realise profits of the period. Therefore, compensation expense is associated with it as it is a general expense that is incurred in line with firm operation during its crucial decision making process (Brüggen & Zehnder, 2014).
With respect to the awards given to employees, the shares given at an offer price of $60.25, and the number of shares was 73,000. Since this is the market value, the entries would be on equity/capital account, cash/bank account, dividend account, P &L account.
P&L accountsDr.Cr.
4,398,250 to reserves a/c
Reserves accountDr.Cr.
4,398,250 to P&L a/c
Cash accountDr.Cr.
4,398,

...
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