Deferred tax asset
When profits as per tax laws is more than profits as per books of accounts, A deferred tax asset is required to be created.
Deferred Tax Asset journal entry
Deferred Tax Asset A/C……. Dr
To Profit & Loss A/C……….
It is shown under the head of Non Current Assets in the balance sheet.
Deferred tax liabilities
When profits as per tax laws is less than profits as per books of accounts, Deferred tax liability is required to be created.
Deferred Tax liability journal entry
Profit & Loss A/C … Dr To Deferred Tax Liability A/C…
It is shown under the head of Non Current Liability in the balance sheet.
