I am currently learning about income deferred and current income taxes and I can’t figure out when they should be added to subtracted from the current taxes.
For example:
These are my journal entries
DTL – assets………………………………………….….$7,500
DTA – assets………………………………………….….$6,400
DTA – rent…………………………………………………………………$4,200
Tax expense (benefit) – deferred…………………….….….$9,700
Now when making the income statement, why are the deferred income taxes being SUBTRACTED from the current income taxes. The tax expense (benefit)- deferred is a credit entry and is being subtracted.
Net income before taxes…………………..……….……..$200,000
Provision for income taxes:
Current……………………$71,680
Deferred…………………$(9,700) $ 61,980
Net income……………………………………………………… 138,020
In the next example:
Dr. DTA – LCF………………………………………………..$133,200
Cr. Deferred tax benefit…………………………………………………….$264,680
Cr. DTA – various………………………………………………………………..$50,520
Dr. DTL – various…………………………………………….$182,000
Income Statement:
Loss before taxes………………………………………………………..………$(1,200,000)
Recovery of/provision for taxes:
Current benefit……………………$346,090
Deferred benefit………………….$264,680……………………… $610,770
Loss after taxes……………………………………………………………………. $ (589,230)
The entry Income tax benefit- deferred is also a credit entry but it is not being added to the current benefit.
WHY IS THAT?
