deferred tax accounts question

Open two T accounts, one for deferred tax and one for current tax

Put into each account the brought forward and the carry forward figures

Balance off the deferred tax account and double enter the missing figure to the current tax account

Balance off the current tax account and … there’s your answer

There are 3 “catches” to watch out for

1) Make sure that you correctly record the opening brought forward figures on the correct side of the T account

2) Where there is a revaluation during the year this will (not always in the exam, but sometimes) have deferred tax implications. Where it is indicated that the revaluation DOES have these deferred tax implications, we need to double enter the deferred tax on the revaluation from the credit side of the deferred tax account to the debit side of the revaluation reserve

3) Occasionally the question will tell us the amount charged to the statement of profit or loss and will ask for the carry forward liability …

… or it will tell us both the liability carried forward and the charge to the statement of profit or loss and ask how much cash was paid …

… or tell us how much cash was paid and how much has been charged to the statement of profit or loss and ask for the liability carried forward

These steps that I have outlined above are ROUTINE. They are required for every deferred tax / current tax question and they (should) require no thought

Follow through those that I have written above and then apply them to another question, and another, and another from the mini exercises towards the end of the course notes