ACCOUNTING FOR INCOME TAX

*Natutunan mo gumawa at intindihin ang basic financial statements

1. Balance sheet or statement of financial position
*ito yung financial information about sa asset, liabilities and capital
*Regardless of type of business, sole proprietorship, partnership or corporation
pareparehas ang component except that for sole proprietorship
hindi complicated ang accounting nito. Hindi gaya ng partnership
and coporation wherein mas detalyado at comprehensive ang
accounting.
*Also regardless of the form of business, maparetailing, wholesaling
dealership, manufacturing same ang component nito
*Ang mga accounts sa balance sheet ay mga permanent account.
At the end of the period or accounting period na tinatawag,
buhay parin sila with their ending balances.
2. Income statement or statement of financial performance
*Ito naman contains information about the performance ng entity/company
with respect to revenue and expenses
*Makikita mo ang profitability and how well is the company to exist
in the long run. Malalaman mo kung kaya bang ituloy ng company
ang operasyon. Masyado bang malaki ang expenses kaya maliit ang kita?
O kumikita ba para ipagpatuloy pa ito
*Ang mga accounts dito ay temporary lang. ibig sabihih nawawala o
nagiging zero dahil sinasara mo ang mga balances sa RETAINED EARNINGS
account at the end of accounting period. So that any adjustment regarding
the past operation ay hindi mo na pwedeng irecord sa current date
but you have to make adjustment through the RETAINED EARNINGS ACCOUNT
The reason is that, the adjustment from past transaction should not form
part as measurement of the present performance of the entity. Therefore
it should be adjusted directly to the RETAINED EARNINGS unless there is
a principle or guidance that it should be adjusted to the beginning balances
of the accounts in the current period
3. Statement of cashflows
*Dito makikita mo ang movement ng CASH sa loob ng isang accounting
period. Nahahati ito sa tatlo. Cash flow from operation, Cash flow from
investing, and Cash flow and cash flow from financing.
*Cash flow from operation - from the term "OPERATION", ito yung regular
trasaction ng company mo or transaction regarding sa business operation mo.
Ito yung pagbili mo ng inventory by cash or on account, pagbayad mo ng
accounts payable mo pag binili mo ang inventory mo on account. Pagbenta
mo ng inventory mo in cash or on account. Pagcollect mo ng accounts receivable
mo pag binenta mo ang inventory mo on account. Pagbayad mo ng dialy expenses
mo related your operation like utilities, marketing expense, insurance expenses
and other expenses. To sum it up, ang component ng Cash flow form operation mo\
ay ang CURRENT ASSETS, CURRENT LIABILITIES and INCOME STATEMENT ACCOUNT MO
 *Cash flow form INVESTING - itong transaction na ito ito yung outflow or
pagpapalabas mo ng pera mo para bumili ng building, lupa, machinery, equipment
and other depreciable asset mo na gagamitin mo sa negosyo. To sum
it up, ito yung LONG TERM AND NONCURRENT or PPE component ng BALANCE SHEET MO
*Cash flow from FINANCING - itong transaction na ito yung INFLOW or pagpasok ng
pera sa company mo sa pamamagitan ng pangungutang para kumalap ng pondo
para sa pagpapalago ng company mo. MOST OF this transaction originate from the
LONG TERM LIABILITIES mo like bank loan, bonds payable. In addition, pwede ka
din kumalap ng additonal fund sa pagbebenta ng SHARES OF STOCKS MO. So ibebenta
mo sa mga investor. Ito yong sa stock holderders equity account naman. Therefore
Most of these transactions originate from LONG TERM LIABILITIES and
STOCKHOLDERS EQUITY ACCOUNT MO FROM BALANCE SHEET
4. STATEMENT OF CHANGES IN EQUITY
Dito mo makikita ang ang pagbabago ng itsura ng equity account mo which has
a direct effect sa pagbabago ng asset and lialities mo. Ang changes in equity
kadalasan ay dahil sa paglobo ng RETAINED EARNINGS mo dahil dito mo
itinatapon ang summary ng INCOME MO EVERY YEAR. Dito mo din makikita
ang mga pinamimigay mong DIVIDEND sa mga stockholder. Ang DIVIDEND
ay katumbas ito ng WITHDRAWALS sa Sole proprietorship at parnership.
5. NOTES to the financial statement
*Ito yong tinatawag na disclosure o yong pinagaaralan mo sa dulo ng topic
ng bawat account. Sinasabi dito ang storya ng bawat account. Pinapaliwanag
dito ang mga importanting impormasyon na kailangan sa bawat account
para maintindihan ng mga bumabasa ng ng Financial statement na hindi
marunong sa accounting.
ACCOUNT MO
NCE SHEET MO

So ibebenta
ACCOUNTING FOR INCOME TAX (IA2 2020 PAGE 519)
*SA INTRODUCTION KO pinaliwanag ko ang paggawa ng Financial statement
base sa GENERALLY ACCEPTED ACCOUNTING PRINCIPLE na ginagamit ng
MANAGEMENT TO MAKE DECISION MAKING. TANDAAN MO, "GINAGAMIT
ng MANAGEMENT".

*Natutunan mo kung paano gumawa ng INCOME STATEMENT at magcompute

ng NET INCOME.

*Ang Income statement na ginawa mo ay hindi sapat para sa gobyerno

para paniwalaan ang report na ito, Kaya ang BIR ay may sariling PRINCIPLE
sa pagcompute ng INCOME STATEMENT to arrive at a DIFFERENT AMOUNT
of NET INCOME. KAYA bukod sa ginawa mong INCOME STATEMENT per BOOK
GAGAWA KA PA ng isang INCOME STATEMENT para sa BIR to file for the
INCOME TAX RETURN.

*Sa PAGGAWA NG INCOME TAX RETURN or INCOME STATEMENT FOR BIR

susuriin mo ang bawat account sa libro mo kung ito ba ay TAXABLE INCOME
ang nireport mong REVENUE account, or DEDUCTIBLE EXPENSE BA ITO
for tax purposes. Ipapakita ko sayo ang comparison:

INCOME STATEMENT PER BOOK Income STATEMENT PER TAX RETURN

(Computation of Accounting income (Computation of Taxable income)
100% IBANG IBA ANG TAXAB
REVENUE REVENUE SA NET INCOME PER ACCOUN

1. PERMANENT DIFFERENCES
EXPENSES DEDUCTIBLE EXPENSES 2. TEMPORARY DIFFERENCES

Ang mga differences na ito w

1. Deferred tax asset
NET INCOME TAXABLE INCOME 2. Deffered tax liability
x tax rate X tax rate
NET INCOME AFTER TAX NET INCOME PER TAX RETURN AFTER TAX

Before we proceed, alamin natin ano ba ang DEFERRED TAX ACCOUNTING?

(DEFERRED meaning - postpone, later time, mamaya na, saka na)

ACCOUANTING INCOME TAXABLE INCOME

*or FINANCIAL INCOME is the NET INCOME for the *Is the income for the period determined in accord
period before deducting INCOME TAX EXPENSE with the RULES ESTABLISHED BY TAXATION AUTHO
(ang income tax expense ito yung nacompute mong upon which INCOME TAXES are PAYABLE or RECOV
akala mo ito na ang tax na babayaran mo pero hindi Ito yug basehan ng pagcompute ng INCOME TAX n
pala dahil susundin natin ang BIR pero irerecord parin actual na babayaran mo sa gobyerno o tinatawag n
natin ito sa INCOME TAX EXPENSE INCOME TAX PAYABLE sa record mo.

*This is the INCOME APPEARING on the traditional income *Taxable income is the INCOME APPEARING on th
statement and computed in accordance with accounting TAX RETURN and computed in accordance with th
standards INCOME TAX LAW

*Taxable income may be defined also as the EXCES

of TAXABLE expenses and exemptions for the perio
as defined by the BIR.

*NAKITA MO BA ANG "INCOME TAX EXPENSE AT INCOME TAX PAYABLE HIGHLIGHTED?

Mamaya mauunawaan mo pero yan ang focus ng topic na ito. Nang dahil kasi sa
dalawang yan, ang difference nila will result to EITHER DEFERRED TAX ASSET or DEFERRED TAX LIABILITY

KANINA NASABI KO NA MAGKAIBA ANG RESULTA NG NET INCOME PER ACCOUNTING AT TAXABLE INCOME.
ANO BA ANG MGA FACTORS NA NAKAKAAPEKTO SA PAGKAKAIBA NG DALAWA?

DIFFERENCES BETWEEN ACCOUNTING INCOME AND TAXABLE INCOME

The differences of accounting income may be classified into two, namely:

1. Permanent differences
2. Temporary differences

PERMANENT DIFFERENCES TEMPORARY DIFFENCES

*ITO YUNG MGA ITEMS NA REVENUE AND *Ito yung differences na parehas na isinasama
EXPENSES NA KAHIT ITAGA MO SA BATO AY sa pagcompute ng ACCOUNTING INCOME at TAXA
KASAMA SA PAGCOMPUTE NG ACCOUNTING Ang issue lang is yung TIMING ng PAGRECOGNIZE.
INCOME PERO HINDI KASAMA SA PAGCOMPUTE PRINCIPLE KASI ,sinusunod ang ACCRUAL where in
NG TAXABLE INCOME AND VISE VERSA!!!! is RECOGNIZED in EARNED regardless kung kelan m
ang kabayaran ng performance mo and EXPENSES
*Ang Permanent differences PERTAIN to when INCURRED regardless kung kelan mo babaya
NONTAXABLE REVENUE and NONDEDUCTIBE CASH BASIS ang ginagamit. Wala silang pakialam s
EXPENSES So TAXABLE REVENUE/INCOME sya pag ACTUAL N
 ang CASH
Examples:
1. Interest Income on DEPOSITs (kasi merong EXAMPLE
tinatawag na FINAL TAX KUNG saan hindi mo Accounting income
uli cocomputan pa ng tax. Tingnan mo yung passbook
mo kung meron kang bank account. Every month Taxable income
end nagcocompute ang bank ng interest ng
deposit mo at the same time binabawasan ng
tax.)
2. Dividends received(same as deposit meron ng *Nakita mo ang pagkakaiba SA TABLE?
tax bago mo ibigay sa magrereceived. *Weird ang BIR diba
3. life insurance premium - kasi by law hwag mong *Sa ISOLATED EXAMPLE NA YAN DURIN
isama sa pagcompute ng taxable income pero INCOME TAX EXPENSE of P30 pero per I
pwede mong isama as insurance expense sa *May difference ang INCOME TAX EXPE
pagcompute ng Income per accounting *MAMAYA na natin ipaliwanag ng MALI
4. Tax penalties, surcharges and fines are TAX PAYABLE at DEFERRED TAX ASSET a
nondeductible. Basically, this is the result of
not following the TAX LAWS when filing tax return *Temporary differences are differences between t
baka kasi mali ang computation mo or hindi mo *Temporary differences include TIMING DIFFEREN
dinideclare ng TOTOO ng income mo sa tax return *TIMING DIFFERENCES ARE THE DIFFERENCES BET
so that your are penanlize with surcharges or period reverse in one or more subsequent periods
fined for not following the tax laws! *TIMING DIFFERENCES are items of income and ex
taxable income but at different time period
*For every temporary income difference, eventual
income
*Tingnan mo yung TOTAL COLUMN sa taas. Pareha
*Accordingly, temporary differences give rise to ei

DAHIL WALA NAMANG MASYADONG ISSUE SA PERMANENT DIFFERENCES, FOCUS TAYO SA TEMPORARY DIFFERENCES

KINDS OF TEMPORARY DIFFERENCES

a. TAXABLE TEMPORARY DIFFERENCE - is the temporary difference that will result *ibig sabihin, APPLYING OTHER
kung hindi mo IRERECOGNIZED
in FUTURE TAXABLE AMOUNT in determining TAXABLE INCOME of ACCOUNTING INCOME. ULITIN K
future periods when carrying amount of the asset or liability is recovered TOTAL INCOME TAX EXPENSE IS
or settled

b. DEDUCTIBLE TEMPORARY DIFFERENCE - is the temporary difference that will *ibig sabihin, APPLYING OTH
scenario, kung hindi mo IRER
result in FUTURE DEDUCTIBLE AMOUNT in determing TAXABLE income of TAXABLE INCOME kesa sa AC
future periods when the carrying amount of the asset or liability is THAN TAXABLE INCOME, AN
recovered or settled PAYABLE
TAX BASE - ITO YUNG AMOUNT NG ASSET OR LIABILITY ATTRIBUTABLE TO OR ALLOWED FOR TAX PURPOSES.

TAX BASE OF AN ASSET TAX BASE OF A LIABILITY

*Is the amount that will be DEDUCTIBE FOR *IS normally the carrying amount less the amount
TAX PURPOSES AGAINST FUTURE INCOME that is DEDUCTIBLE for tax purposes in the future

Example: Example:

If an entity has appropriately capitalaized P1,000,000 If an entity has recognzied an estimated warranty
as Software development cost, the carrying amount of P500,000, carrying amout is P500,000 for accou
is P1,000,00, for accounting purposes. purposes

However, if the amount is allowed as ONE-TIME However, an estimated warranty cost is DEDUCTIB
deduction for tax purpose, the tax base is ZERO when ACTUALLY PAID (sinabi ko na to kanina)
because the entire amount is expensed in the current
year. Thus, The tax base is ZERO because the ESTIMATED
COST is a FUTURE DEDUCTIBLE AMOUNT.

*FUTURE DEDUCTIBLE sya DAHIL? Dahil wala pan

ANG TAX BASE AY YUNG AMOUNT KUNG SAAN MO IMUMULTIPLY ANG TAX RATE
100% IBANG IBA ANG TAXABLE INCOME AMOUNT NA MAKUKUHA MO KUMPARA
SA NET INCOME PER ACCOUNTING MO DAHIL SA MGA SUMUSUNOD:

1. PERMANENT DIFFERENCES
2. TEMPORARY DIFFERENCES

Ang mga differences na ito will result sa tinatawag na

1. Deferred tax asset
2. Deffered tax liability
e period determined in accordance
BLISHED BY TAXATION AUTHORITIES (BIR)
TAXES are PAYABLE or RECOVERABLE.
agcompute ng INCOME TAX na talagang
mo sa gobyerno o tinatawag na
LE sa record mo.

he INCOME APPEARING on the INCOME

mputed in accordance with the

y be defined also as the EXCESS

s and exemptions for the period

RRED TAX LIABILITY

ABLE INCOME.

s na parehas na isinasama
CCOUNTING INCOME at TAXABLE INCOME.
g TIMING ng PAGRECOGNIZE. Per ACCOUNTING
sunod ang ACCRUAL where in ang REVENUE
RNED regardless kung kelan mo marereceive
rformance mo and EXPENSES are RECOGNIZED
ardless kung kelan mo babayara. Ang BIR kasi
gamit. Wala silang pakialam sa ACCRUAL BASIS.
E/INCOME sya pag ACTUAL Na NARECEIVE MO
 2020 INCOME STATEMENT 2021 INCOME STATEMENT TOTAL
Sales on ACCOUNT of P100 Cash collected the following year
100 0 100

0 100 100

mo ang pagkakaiba SA TABLE?

TED EXAMPLE NA YAN DURING 2020 , assuming 30% ang tax rate, ang ACCOUNTING INCOME is reporting
TAX EXPENSE of P30 pero per INCOME TAX RETURN ang INCOME TAX PAYABLE ay ZERO.
erence ang INCOME TAX EXPENSE and INCOME TAX PAYABLE causing DEFERRED TAX LIABILITY
A na natin ipaliwanag ng MALINAW ang relationship ng INCOME TAX EXPENSE and INCOME
BLE at DEFERRED TAX ASSET and DEFERRED TAX LIABILITY

ces are differences between the carrying amount of an asset or liability and the TAX BASE
ces include TIMING DIFFERENCES
ES ARE THE DIFFERENCES BETWEEN accounting income and taxable income that originate in one
e or more subsequent periods
ES are items of income and expenses which are included in both accounting income and
at different time period
y income difference, eventually that item's treatement will be the same as acounting and taxable

OTAL COLUMN sa taas. Parehas naman diba kaso yung TIMING Ng pagrecognize magkaiba!
rary differences give rise to either DEFERRED TAX LIABILITY and DEFERRED TAX ASSET

MPORARY DIFFERENCES FOR THE YEAR 2020

ACCOUNTING

REVENUE 100
*ibig sabihin, APPLYING OTHER as CONSTANT in the CURRENT PERIOD pag iimagine mo ang scenario,
kung hindi mo IRERECOGNIZED as TAXABLE AMOUNT ngayon, MAS maliit ang TAXABLE INCOME kesa sa
ACCOUNTING INCOME. ULITIN KO. ACCOUNTING INCOME IS HIGHER THAN TAXABLE INCOME, AND
TOTAL INCOME TAX EXPENSE IS HIGHER THAN INCOME TAX PAYABLE

EXPENSES
*ibig sabihin, APPLYING OTHER as CONSTANT in the CURRENT PERIOD pag iimagine mo ang 20
scenario, kung hindi mo IRERECOGNIZED as DEDUCTIBLE AMOUNT ngayon, MAS MALAKI ang
TAXABLE INCOME kesa sa ACCOUNTING INCOME. ULITIN KO. ACCOUNTING INCOME IS LOWER
THAN TAXABLE INCOME, AND INCOME TOTAL TAX EXPENSE IS HIGHER THAN INCOME TAX
PAYABLE NET INCOME 80
TAX RATE 30%
TOTAL INCOME TAX EXPENSE 24
INCOME TAX PAYABLE
 *2020 ACCOUNTIN INCOME IS HIGHER THAN THE TAX BASE

Journal entry 2020

Income tax expense 24
Deferred tax liability
TAX PURPOSES. (Zero ang income tax payable dito dahil
walang income na irerecognize dahil
taxable daw sa future assuming yung nasa taas
lang ang available data)

Journal entry 2021

ying amount less the amount Deferred tax liability 24
or tax purposes in the future Income tax payable

when tax is paid:

gnzied an estimated warranty liability Income tax payable 24

g amout is P500,000 for accounting Cash

s
ed warranty cost is DEDUCTIBLE ONLY
D (sinabi ko na to kanina)

ZERO because the ESTIMATED WARRANTY

EDUCTIBLE AMOUNT.

LE sya DAHIL? Dahil wala pang ACTUAL PAYMENT!!!

ULTIPLY ANG TAX RATE!!!!

FOR THE YEAR 2020 FOR THE YEAR 2021

ACCOUNTING BIR ACCOUNTING BIR

0 REVENUE 0 100

EXPENSES
0 0 20

0 NET INCOME 0 80
30% 30% 30%
0
0 24
ME IS HIGHER THAN THE TAX BASE *2021 ACCOUNTING INCOME IS LOWER THAN THE TAX BASE

*MEDYO inadvance ko ang presentation. Para unti unti mong *Actually on 2021, pwede mo namang gamiti
maintindihan. Yung TOTAL INCOME TAX EXPENSE, yun yunG Deferred tax asset dahil mas malaki ang ang INC
result multiplying the INCOME TAX RATE with the PAYABLE kaso saktong REVERSAL LANG KAS
ACCOUNTING INCOME. HINDI ITO YUNG ACTUAL NA DEFERRED TAX LIABILITY ang INCOME TAX PAY
24 BABAYARAN MO KASI NGA SABI NI BIR SUSUNDIN SILA. ANG P24. Kung more than P24 yan, yung excess yu
TOTOONG BABAYARAN MO KUNG MAGKANO ANG icharge mo sa DEFERRED TAX ASSET. CUMULAT
ome tax payable dito dahil COMPUTATION NI BIR. PERO DAHIL ITO AY TEMPORARY ang DEFERRED TAX LIABILITY and DEFERRED TA
DIFFERENCES THE FOLLOWING YEAR MO DAW Remember our topin in UNREALIZED GAIN OR L
me na irerecognize dahil IRERECOGNIZE. LOOK AT YEAR 2021, WALA KANG INCOME NIREREPORT SA OCI or OTHER COMPREHENSIVE
TAX EXPENSE DAHIL NARECORD MO NA DURING 2020. AND NA CUMULATIVE ANG REPORTING NATIN? PA
a future assuming yung nasa taas ON 2021 PA LANG IRERECOGNIZE NI BIR AND YOU WILL GET GANUN LANG. SIGE EXAMPLE TAYO NG MAY DE
AN AMOUNT THAT IS ACTUALLY TO BE PAID BY MULTIPLYING TAX ASSET. KUNWARI ANG SAME DATA FOR 2
BIR INCOME OR TAXABLE INCOME BY THE TAX RATE. BAGUHIN NATIN ANG 2021. TINGNAN MO ANG
Malamang tatanungin mo bakit DEFERRED TAX LIABILITY. ILLUSTRATION SA KANAN WITH CORRESPON
KASI ipopostpone mo ang pagbabayad ng corresponding tax JOURNAL ENTRY
because of the RULE. So yung JOURNAL ENTRY MO dahil base
on accounting principle ka at hindi TAX LAW, magrerecognize
ka talaga ng expense using ACCRUAL BASIS OF ACCOUNTING.
DEBIT EXPENSE and CREDIT "DEFERRED" LIABILITY. Ibig
24 sabihin, nakapostpone ang pagrecognize mo ng ACTUAL
liability but you have to recognize the EXPENSE NOW.

24
 on 2021, pwede mo namang gamitin ang
asset dahil mas malaki ang ang INCOME TAX FOR THE YEAR 2020
E kaso saktong REVERSAL LANG KASI NG
TAX LIABILITY ang INCOME TAX PAYABLE na
more than P24 yan, yung excess yun yung ACCOUNTING BIR
sa DEFERRED TAX ASSET. CUMULATIVE kasi
ED TAX LIABILITY and DEFERRED TAX ASSET.
our topin in UNREALIZED GAIN OR LOSS NA
SA OCI or OTHER COMPREHENSIVE INCOME REVENUE 100 0
LATIVE ANG REPORTING NATIN? PARANG
NG. SIGE EXAMPLE TAYO NG MAY DEFERRED
. KUNWARI ANG SAME DATA FOR 2020 AT
ATIN ANG 2021. TINGNAN MO ANG SIMPLE
TION SA KANAN WITH CORRESPONDING
JOURNAL ENTRY

EXPENSES
-20 0

NET INCOME 80 0
TAX RATE 30% 30%
INCOME TAX EXPENSE 24
INCOME TAX PAYABLE 0

Journal entry 2020

Income tax expense 24
Deferred tax liability 24
(Zero ang income tax payable dito dahil
walang income na irerecognize dahil
taxable daw sya future assuming yung nasa taas
lang ang available data)

Journal entry 2021

Deferred tax liability 24
Deferred tax asset 6
Income tax payable 30

when tax is paid:

Income tax payable 30

Cash 30

*Nakita mo ba?????. Alam mo na

 FOR THE YEAR 2021

ACCOUNTING BIR

REVENUE 0 120

EXPENSES
0 -20

NET INCOME 0 100

30% 30%
0
30

able dito dahil

suming yung nasa taas

ACCOUNTING FOR INCOME TAX…continuation (IA2 2020 PAGE 524)

DEFERRED TAX LIABILITY

(ACCOUNTING INCOME HIGHER THAN TAXABLE INCOME)

*Deferred tax liability is the AMOUNT OF INCOME TAX PAYABLE in future periods
with respect to a TAXABLE TEMPORARY DIFFERENCE

*A DEFERRED TAX LIABILITY is the deferred tax consequence attributable to a

taxable temporary differnence or FUTURE TAXABLE AMOUNT

Actually , a deferred tax liability arises from the following:

a. When the ACCOUNTING INCOME is HIGHER THAN THE TAXABLE INCOME

because of TIMING DIFFERENCES
b. When the CARRYING AMOUNT of an asset is HIGHER than the tax base
(refer to our topic on TAX BASE)
c. When the carrying amount of liability is lower than the tax base
(refer to our topic on TAX BASE)

ACCOUTING INCOME HIGHER THAN THE TAXABLE INCOME

Temporary differences that result in accounting income HIGHER than taxable income
include the following:

1. Revenue and gains are INCLUDED in accounting inocme of the current period
but are taxable in future period

*Ex. An installment sale is included in accounting income at the time

of sale and included in taxable income when cash is collected in future
peirods

2. Expenses and losses are deductibe for tax purposes in the current period but
deductible for accounting purposes in future peirods

Ex.
a. Accelerated depreciation for tax purposes and straight line depreciation
for accounting purposes

b. Development cost may be capitalized and amortized over future

periods in determining accounting income but deducted in determining
taxable income in the period in which it is PAID
 c. Prepaid expenses has already been deducted on CASH BASIS in
determining TAXABLE INCOME of the current period

OTHER TAXABLE TEMPORARY DIFFERENCES

Most taxable temporary differences arise because of differences in the timing of the
recognition of the transaction for accounting and tax purposes

However, there are other taxable temporary differences that technically are not timing
differences but nevertheless give rise to deferred tax liability such as follows:

a. Asset is REVALUED UPWARD and no equivalent adjustment is made for tax purposes

b. The carrying amount of investment in subsidiary, associate or joint venture is

higher than the tax base because the subsidiary or associate or joint venture
HAS NOT DISTRIBUTED its entire income to the parent or investor.

c. The cost of a business combination that is accounted for as an acquisition is

allocated to the identifiable assets and liabilities acquired at fair value

RECOGNITION OF A DEFERRED TAX LIABILITY

PAS 12 PAR 15 Provides that a deferred tax liability shall be recognized

for all taxable temporary differences

However, a deferred tax liability is NOT RECOGNIZED when the taxable temporary
difference arise from:

a. Goodwill resulting from a business combination and which is

NONDEDUCTIBLE for tax purposes

b. INITIAL RECOGNITION OF ASSET OR LIABILITY in a transaction

that is not a business combination and AFFECTS NEITHER ACCOUNTING
INCOME NOR TAXABLE INCOME

c. UNDISTRIBUTED PROFIT of subsidiary, associate, or joint venture when the parent

or investor or venturer IS ABLE TO CONTROL the timing of the reversal
of the temporary differerence
HINDI MO KAILANGAN IMEMORIZE LAHAT. MAY PORTION KA DYAN NA TATANDAAN.
MERON KANG PORTION NA MAKIKITA NA KABALIKTARAN LANG NANG ISA
PINAKAIMPORTANTE, NAUNAWAAN MO ANG CONCEPT
PAGE 524)

DEFERRED TAX ASSET

(TAXABLE INCOME HIGHER THAN ACCOUNTING INCOME)

*Deferred tax asset is the amount of INCOME TAX RECOVERABLE in future periods
with respect to DEDUCTIBLE TEMPORARY DIFFERENCE and OPERATING LOSS carryoforward

*In other words, a DEFERRED TAX ASSET is the deferred tax consequence attributable
to FUTURE DEDUCTIBLE AMOUNT AND OPERATING LOSS CARRYFORWARD

Actually , a deferred tax asset arises from the following:

a. When the THE TAXABLE INCOME is HIGHER THAN THE ACCOUNTING INOCME
because of TIMING DIFFERENCES
b. When the TAX BASE IS HIGHER THAN CARRYING AMOUNT of an asset.
(refer to our topic on TAX BASE)
c. When the TAX BASE OF A LIABITIY IS LOWER THAN THE CARRYING AMOUNT
(refer to our topic on TAX BASE)

TAXABLE INCOME HIGHER THAN ACCOUNTING INCOME

Temporary differences that will result to taxable income HIGHER than accounting income
because of timing differences include the following:

1. Revenue and gains are included in taxable income of current period but are included
in accounting inocme of future periods

*Ex. Rent received in advance is taxable at the time of receipt but deferred in future periods
for accounting purposes

2. Expenses and losses are deducted from accounting income of current period but are
deductible for tax purposes in future periods

FUTURE DEDUCTIBLE TEMPORATY DIFFERENCES INCLUDE THE FOLLOWING:

a. A probable and measurable litigiation loss is recognized for accounting purposes but
deducted in determining taxable income when actually incurred or paid

b. Estimated product warranty cost is recognized for accounting purposes in the current
period but deducted in determining taxable income when actually incurred or paid
c. Research cost is recognized as expensed in determining accounting income but not
permitted as a deduction in determining taxable income until a later period

d. An impairment loss is recognized for accounting as expense for accounting purposes

but deductible for tax purposes only when written off as worthless

OTHER DEDUCTIBLE TEMPORARY DIFFERENCE

Temporary differences that technically are not timing differences but nevertheless give rise
to deferred tax asset include the following:

a. Asset is REVALUED DOWNWARD and no equivalent adjustment is made for tax purposes

b. The tax base of investment in subsidiary, associate or joint venture is higher than
the carrying amount because the subsidiary, associate, or joint venture has suffered
continuing losses in current and prior years

RECOGNITION OF A DEFERRED TAX ASSET

PAS 12 PAR 24 Provides that the deferred tax asset shall be recognized for all deductible
temporary differences and operating LOSS CARRYFORWARD WHEN IT IS PROBABLE THAT
TAXABLE INCOME WILL BE AVAILABLE AGAINST WHICH THE DEFERRED TAX ASSET CAN
BE USED.

Operating loss carryforward

*is an excess of tax deductions over gross income in a year that may be carried forward
to reduce taxable income in a future year.

Certain entities registered with the Board of Investments are permitted to carry over
net operating loss for tax purposes subject to limitations of the relevant law and
implementing regulations of the BOARD of INVESTMENTs
SS carryoforward

ounting income

are included

d in future periods

eriod but are

urposes but

n the current
ng purposes

rtheless give rise

for tax purposes

all deductible
ROBABLE THAT
X ASSET CAN

rried forward
INCOME STATEMENT TAX RETURN INCOME STATEMENT
(ACCOUNTING INCOME) (TAXABLE INCOME)
(ACCRUAL ACCOUNTING) (CASH BASIS)
(CARRYING AMOUNT OF ASSET OR LIABILITY) (TAX BASE OF ASSET OR LIABILITY
.
REVENUE XX REVENUE PER TAX RETURN

EXPENSES (XX) EXPENSES PER TAX RETURN

NET INCOME XX TAXABLE INCOME

Mulitply: tax rate xx% Mulitply: tax rate

INCOME TAX EXPENSE XX INCOME TAX PAYABLE OR ITP
(TOTAL INCOME TAX EXPENSE) (CURRENT TAX EXPENSE)

DTL- DEFERRED TAX LIABILITY

DTA - DEFERRED TAX ASSET
TTD - TAXABLE TEMPORARY DIFFERENCES
DTD - DEDUCTIBLE TEMPORARY DIFFERENCES
AI - ACCOUNTING INCOME
TI - TAXABLE INCOME
DTL AITI-ACCOUNTING INCOME HIGHER THAN TAXABLE INCOME
DTA TIAI - TAXABLE INCOME HIGHER THAN ACCOUNTING INCOME
TITE - TOTAL INCOME TAX EXPENSE
ITP - INCOME TAX PAYABLE
CITE- CURRENT INCOME TAX EXPENSE

WAG MO MASYADO ISIPIN ANG ACCOUNTING INCOME KASI GIVEN NA YAN NA NANDAYAN
ANG IPREPARE MO LANG AY ANG TAX RETURN INCOME STATEMENT VERSION.
Ang kailangan mo lang naman sa INCOME STATEMENT kadalasan is yung
ACCOUNTING INCOME dahil icocompare mo lang ito sa TAXABLE ICOMCE

AITI - will result to DTL

TIAI - will result ot DTA

REMEMBER CUMULATIVE ANG DTL AND DTA.

BASTA BANTAYAN MO ANG REVERSAL NG BAWAT ISA
MAKIKITA MO NAMAN KUNG MAS MATASS ANG INTEREST EXPENSE KESA SA INTEREST PAYABLE

KAPAG MAS MATAAS ANG INTEREST EXPENSE KESA INTEREST PAYABLE NG CURRENT YEAR
THIS WILL RESULT TO DTL PERO CHECK MO MUNA KUNG MAY DTA PREVIOUS YEAR
DAHIL IREREVERSE MO MUNA AND YUNG EXCESS PAG MERON AY CREDIT TO DTL

KAPAG MAS MATAAS ANG INTEREST PAYABLE KESA INTEREST EXPENSE NG CURRENT YEAR
THIS WILL RESULT TO DTa PERO CHECK MO MUNA KUNG MAY DTl PREVIOUS YEAR
DAHIL IREREVERSE MO MUNA AND YUNG EXCESS PAG MERON AY CREDIT TO DTA

NOTE:
ITE= ACCOUNTING INCOME X TAX RATE
ITP - TAXABLE INCOME X TAX RATE

USUALLY LALARUIN KA SA TTD AT DTD WHICH DIRECTLY AFFECT THE TAXABLE INCOME
 TEMPORAY DIFFERENCES
ACCOUNTING LESS TAX RETURN

XX TAXABLE (REVENUE) TEMPORARY DIFFERENCE XX

(XX) DEDUCTIBLE (EXPENSES) TEMPORARY DIFFERENCE (XX)

XX DIFFERENCE XX

xx% Mulitply: tax rate xx%

XX DTL OR DTA XX

TAXABLE INCOME
COUNTING INCOME

*SAME LANG ANG ITP AND CITE

ENSE KESA SA INTEREST PAYABLE

AYABLE NG CURRENT YEAR

UNG MAY DTA PREVIOUS YEAR
G MERON AY CREDIT TO DTL

XPENSE NG CURRENT YEAR

UNG MAY DTl PREVIOUS YEAR
G MERON AY CREDIT TO DTA

T THE TAXABLE INCOME

 Journal entry

(DEFERRED TAX LIABILITY ANG MAKUKUHA MO DITO PAG NA-MULTIPLY MO SA TAX RATE) Income tax expense

(DEFERRED TAX ASSET ANG MAKUKUHA MO DITO PAG NA-MULTIPLY MO SA TAX RATE) Deferred tax asset

(INCOME TAX PAYABLE ANG MAKUKUHA MO DITO PAG NA-MULTIPLY MO SA TAX RATE Income tax expense

actually ito yung CURRENT TAX EXPENSE MO (TAXABLE INCOME X TAX RATE)
JOURNAL ENTRY:

INCOME TAX EXPENSE XX

INCOME TAX PAYABLE XX

*KASO ICOMPRE MO ANG DALAWA

ACCOUNTING INCOME X TAX RATE = INCOME TAX EXPENSE

VS.

TAXABLE INCOME X TAX RATE = INCOME TAX PAYABLE (CURRENT TAX EXPENSE)

If higher ang accounting income kesa sa taxable income, magdadagdag ka pa ng

DR INCOME TAX EXPENSE AT YUNG CREDIT MO HINDI INCOME TAX PAYABLE
KUNDI DEFERRED TAX LIABILITY

BAKA MALITO KA KASI SA FORMULA KO NAGSHORT CUT LANG AKO

ANG GINAWA KO. YUNG MACOCOMPUTE NA TAX USING THE ACCOUNTING INCOME
NILAGYAN KO NG INCOME TAX EXPENSE kasi per book yun din naman ang lalabas
na amount ng INCOME TAX EXPENSE. TOTOO YAN

ANG GAMIT LANG NAMAN NG TAXABLE INCOME IS TO DETERMINE WETHER MAY

DTL OR DTA DAHIL SA TEMPORARY DIFFERENCES NA KAILANGAN MONG IRECORD
SA ACCOUNTING BOOK MO.

Pag tinanong lang naman kung ano ang current tax expense mo e di gamitin mo
ang TAXABLE INCOME x tax rate. Yun na yun.
Tingnan mo yung page 529 yung accounting procedure, icompare mo sa formula or
format ko. Hanggang marealize mo ang point ko.

ACTUALLY, ANG COMPONENT NG NG "ACCOUNTING INCOME X TAX RATE = TOTAL TAX

EXPENSE" AY YUNG

CURRENT TAX EXPENSE XX (TAXABLE INCOME X TAX RAT

PLUS: DEFERRED TAX EXPENSE xx (TAXABLE TEMPORARY DIFFE
LESS: XX (DEDUCTIBLE TEMPORAY DIF
TOTAL TAX EXPENSE XX (ACCOUNTING INCOME X TA
 Journal entry

Income tax expense xx

Deferred tax liability xx

Deferred tax asset xx *pwede mo ideretso icredit sa Income tax expense kasi ang income tax benefit ay p
Income tax benefit xx

Income tax expense xx * actually ito yung NET amount ng entry mo ng INCOME TAX EXPENES sa taas
Income tax payable xx * Yung difference na lang ng DTL at DTA ang isingit mo pagkatapos mo icompare
sa makukuha mong TAX sa ACCOUNTING INCOME x TAX RATE
E X TAX RATE)
Income tax expense(total tax expense) xx
Deferred tax Asset xx
Income tax payable

or

Income tax expense x

Deferred tax liability
Income tax payable

ENT TAX EXPENSE)

dagdag ka pa ng
TAX PAYABLE

CCOUNTING INCOME
naman ang lalabas

INE WETHER MAY

N MONG IRECORD

e di gamitin mo
re mo sa formula or

TAX RATE = TOTAL TAX

(TAXABLE INCOME X TAX RATE)

(TAXABLE TEMPORARY DIFFERENCE X TAX RATE)
(DEDUCTIBLE TEMPORAY DIFFERENCES)
(ACCOUNTING INCOME X TAX RATE)
asi ang income tax benefit ay pinapababa niya ang Income tax expense, ibig sabihin, mas malaki ang DTD kesa sa TTD

ME TAX EXPENES sa taas

o pagkatapos mo icompare

xx

xx
xx
ACCOUNTING FOR INCOME TAX…continuation (IA2 2020 PAGE 528-529)
PAGE 528-529)
ILLUSTRATION : DEFERRED TAX LIABILITY (IA2 2020 PAGE 530)
IN 2020, AN ENTITY reported in accounting income a gross profit on installment sale
of P1,000,000, but not in taxable income..

This temporary difference is expected to be reported in taxable income in 2021 and 2022
The income tax rate is 30%

Since the temporary difference results to a higher accounting income in 2020, there is
DEFERRED TAX LIABILITY
2020 2021 2022
ACCOUNTING INCOME 4,000,000 5,000,000 7,000,000
TAXABLE INCOME 3,000,000 5,500,000 7,500,000
DIFFERENCE 1,000,000 (500,000) (500,000)

SOLUTION:

Ang papansinin mo na lang pag ganito ay ang Taxable income at yung difference
Hindi mo muna gagamitin ang short cut ko para maipaliwanag base kay valix

1. Record current tax expense - (TI x tax rate), laging ganyan ang formula ng current tax expense pag tinatanong

Income tax expense 900,000

Income tax payable (3,000,000 x 30%) 900,000

2. Siyempre kailangan mong irecord yung DIFFERENCE dahil ang lalabas dapat na INCOME TAX EXPENSE sa
libro mo ay base sa 4,000,000 x 30%. The only reason na nagentry tayo sa number 1 para
ipakita natin ang tax expense or yung actual na babayara mo dahil iyon ang computation
na inapprove ni BIR

Income tax expense(1,000,000 x 30%) 300,000

Deferred tax liability 300,000

TOTAL TAX EXPENSE (30% X 4,000,000) 1,200,000

CURRENT TAX EXPENSE(30% X 3,000,000) 900,000
DEFERRED TAX LIABILITY 300,000

TRY NATIN GAMITIN YUNG FORMULA for 2020 LANG PARA MAKITA MO
Sa example, NET INCOME na lang ang ibinigay kaya diretso tayo sa ACCOUNTING and TAXABLE INCOME field

INCOME STATEMENT TAX RETURN INCOME STATEMENT

(ACCOUNTING INCOME) (TAXABLE INCOME)
(ACCRUAL ACCOUNTING) (CASH BASIS)
(CARRYING AMOUNT OF ASSET OR LIABILITY) (TAX BASE OF ASSET OR LIABILITY
.
REVENUE XX REVENUE PER TAX RETURN

EXPENSES (XX) EXPENSES PER TAX RETURN

NET INCOME 4,000,000 TAXABLE INCOME

Mulitply: tax rate 30% Mulitply: tax rate

INCOME TAX EXPENS 1,200,000 INCOME TAX PAYABLE
*ITO ANG TOTAL INCOME TAX EXPENSE

NAKITA MO BA NA YUNG INCOME TAX EXPENSE UNDER ACCOUNTING INCOME AY "TOTAL EXPENSE" NA BREAKDOWN LANG N

INCOME STATEMENT PRESENTATION FOR 2020

Revenue xx

Less: Expenses xx

NET INCOME BEFORE TAX 4,000,000

Income tax expense

Current tax expense 900,000
Deferred tax expense 300,000 1,200,000

NET INCOME 2,800,000

JOURNAL ENTRIES IN 2021

*Tingnan mo yung data ng 2021 COLUMN
 *Remember meron kang Deffered tax liability noong 2020 na 300,000

2020 2021 2022

ACCOUNTING INCOME 4,000,000 5,000,000 7,000,000
TAXABLE INCOME 3,000,000 5,500,000 7,500,000
DIFFERENCE 1,000,000 (500,000) (500,000)
DTL DTA DTA

1. To record the current tax expense (syempre base sa TAXABLE INCOME. Ganon lang naman lagi

Income tax expense 1,650,000

Income tax payable (5,500,000 x 30%) 1,650,000

2. To decrease the deferred tax liability (tingnan mo last year DTL, and this year 2021 DTA na sya. Pero not enough
to reverse ang buong DTL na 300,000

*Para maintindihan mo, hindi ko susundin muna ang entry ni valix

*Pwede ka muna magentry sa DIFFERENCE as follows

Deferred tax asset( 500,000 x 30%) 150,000

Income tax expense 150,000

*Then CUMULATIVE ng DTL and DTA. Dito isasara na lang natin ang DTA
sa DTL kasi nga mas malaki ang DTL dahil CUMULATIVE balance nga ang
kukunin natin

Deferred tax liability 150,000

Deferred tax asset 150,000

*therefore kung ishort cut mo ganito lang pala ang entry

Income tax expense 150,000

Deferred tax liability 150,000

*Di ba ganyan ang entry ni VALIX?

*The NEGATIVE DIFFERENCE WILL DECREASE THE DTL

INCOME STATEMENT PRESENTATION FOR 2021

Revenue xx

Less: Expenses xx
NET INCOME BEFORE TAX 5,000,000

Income tax expense

Current tax expense 1,650,000
Decrease in DTL (150,000) 1,500,000

NET INCOME 3,500,000

JOURNAL ENTRIES IN 2022

*Tingnan mo yung data ng 2022 COLUMN
*Remember meron ka pang NATITIRANG balance ng deffered tax liability na 150,000 as of December 31, 2021

2020 2021 2022

ACCOUNTING INCOME 4,000,000 5,000,000 7,000,000
TAXABLE INCOME 3,000,000 5,500,000 7,500,000
DIFFERENCE 1,000,000 (500,000) (500,000)
DTL DTA DTA

1. To record the current tax expense (syempre base sa TAXABLE INCOME. Ganon lang naman lagi

Income tax expense 2,250,000

Income tax payable (7,500,000 x 30%) 2,250,000

2. To decrease uli ang deferred tax liability dahil mas malaki uli ang taxable income kesa accounting income
*Pero tandaan mo may DTL balance ka

*Para maintindihan mo, hindi ko susundin muna ang entry ni valix

*Pwede ka muna magentry sa DIFFERENCE as follows

Deferred tax asset( 500,000 x 30%) 150,000

Income tax expense 150,000

*Then CUMULATIVE ng DTL and DTA. Dito isasara na lang natin ang DTA
sa DTL kasi nga mas malaki ang DTL dahil CUMULATIVE balance nga ang
kukunin natin

Deferred tax liability 150,000

Deferred tax asset 150,000

*therefore kung ishort cut mo ganito lang pala ang entry

 Income tax expense 150,000
Deferred tax liability 150,000

*Di ba ganyan ang entry ni VALIX?

*The NEGATIVE DIFFERENCE WILL DECREASE THE DTL

*The deferred tax liability on December 31, 2022 has ZERO balance because the Taxable difference is now fully REVERSED

INCOME STATEMENT PRESENTATION FOR 2022

Revenue xx

Less: Expenses xx

NET INCOME BEFORE TAX 7,000,000

Income tax expense

Current tax expense 2,250,000
Decrease in DTL (150,000) 2,100,000

NET INCOME 4,900,000

 DTL- DEFERRED TAX LIABILITY
DTA - DEFERRED TAX ASSET
TTD - TAXABLE TEMPORARY DIFFERENCES
DTD - DEDUCTIBLE TEMPORARY DIFFERENCE
AI - ACCOUNTING INCOME
TI - TAXABLE INCOME
DTL AITI-ACCOUNTING INCOME HIGHER THAN TA
TIAI - TAXABLE INCOME HIGHER THAN ACCOU
DTA ITE - INCOME TAX EXPENSE
ITP - INCOME TAX PAYABLE

*Ito yung sinasabi niya na mas mataas ang 2020 AI kesa sa TI

*mapapansin mo yung P1,000,000 noong 2020 ay naoffset noong 2021 and 2022

To summarize these two entries:

se pag tinatanong
Income tax expense 1,200,000
Deferred tax liability 300,000
Income tax payable 900,000

X EXPENSE sa Diba parang ganito lang:

ACCOUNTING INCOME X TAX RATE = 4,000,000 X 30% = 1,200,000 (TOTAL INCOM

TAXABLE INCOME X TAX RATE =3,000,000 X 30% = 900,000
DIFFERENCE OF 1,200,000 - 900,000 = 300,000 DTL
AITI = DTL

JOURNAL ENTRY

Income tax expense 1,200,000

Deferred tax liability 300,000
Income tax payable 900,000
E INCOME field

TEMPORAY DIFFERENCES
ACCOUNTING LESS TAX RETURN

XX TAXABLE (REVENUE) TEMPORARY DIFFERENCE

(XX) DEDUCTIBLE (EXPENSES) TEMPORARY DIFFERENCE

3,000,000 DIFFERENCE

30% Mulitply: tax rate

900,000 DTL OR DTA
ITO ANG CURRENT TAX EXPENSE

PENSE" NA BREAKDOWN LANG NG INCOME TAX PAYABLE AT DTL/DTA?

 *Ito yung sinasabi niya na mas mataas ang 2020 AI kesa sa TI
*mapapansin mo yung P1,000,000 noong 2020 ay naoffset noong 2021 and 2022

ng naman lagi

21 DTA na sya. Pero not enough

DTL DTA
2020 300,000 12/31/2021 150,000
150,000 2021 adj. 150,000

150,000 2021 balance end 0

00 as of December 31, 2021

*Ito yung sinasabi niya na mas mataas ang 2020 AI kesa sa TI

*mapapansin mo yung P1,000,000 noong 2020 ay naoffset noong 2021 and 2022

ng naman lagi

kesa accounting income

DTL DTA
12/31/2020 300,000 12/31/2020 150,000
150,000 2021 adj. 150,000

150,000 2021 beg 150,000 0

150,000 2022 adj 150,000

0 2022 balance end

rence is now fully REVERSED
 TAX LIABILITY
D TAX ASSET
TEMPORARY DIFFERENCES
BLE TEMPORARY DIFFERENCES

NG INCOME HIGHER THAN TAXABLE INCOME

NCOME HIGHER THAN ACCOUNTING INCOME
AX EXPENSE
AX PAYABLE

0% = 1,200,000 (TOTAL INCOME TAX EXPENSE)

XX

(XX)

1,000,000

30%
300,000
ITO NAMAN EITHER DTL OR DTA DEPENDE
KUNG ALIN ANG MAS MATAAS SA TTD OR DTD
2021 adjustment

2021 balance end

2021 adjustment

2021 balance end

2022 adjustment

0 2022 balance end

ILLUSTRATION : DEFERRED TAX ASSET (IA2 2020 PAGE 532)
In 2020, an entity received an advance rental payment of P600,000 which was subject to TAX
but NOT reported in ACCOUNTING income until 2021. The income tax rate is 30%

Thie income statement and tax return showed the following:

2020 2021
Accounting income subject to tax 5,000,000 7,000,000
Taxable Income 5,600,000 6,400,000

Since the temporary difference results to a higher taxable income in 2020, there is a
DEFERRED TAX ASSET

SOLUTION:

*Kailangan mo pa ba ang mahabang table na formula? Hindi na, masyadong mahaba.

2020 2021
Accounting income subject to tax 5,000,000 7,000,000
Taxable Income 5,600,000 6,400,000
DIFFERENCE -600,000 600,000 * Nakita mo yung temporay diff
DTA DTL *Kaya siya tinawag na tempora
*Narereverse kasi sya the follow
*NET BALANCE ON DECEMBER

DIRETSO NA TAYO SA JOURNAL ENTRY

1. To record the curretn income tax expense (diba magbase ka lang naman sa Taxable income)

Income tax expense(5,600,000 x 30%) 1680000

Income tax payable 1680000

2.To record the deferred tax asset

*Hindi ko susundin si Valix para di ka malito, ideretso ko na

Deferred tax asset 180,000

Income tax expense 180,000 * Kay VALIX kasi, ang credit niya ay INCOM
*IREREVERSE MO DIN KASI IN THE FUTURE
dahil "BENEFIT" means paliliitin
TOTAL TAX EXPENSE (30% X 5,000,000) 1,500,000 ay INCOME TAX expense.
CURRENT TAX EXPENS(30% X 5,600,000) 1,680,000
DEFERRED TAX ASSET -180,000 ang entry ni VALIX:

Deferred tax expense

INCOME STATEMENT PRESENTATION FOR 2020

Revenue xx

Less: Expenses xx

NET INCOME BEFORE TAX 5,000,000

Income tax expense

Current tax expense 1,680,000
Income tax benefit -180,000 1,500,000

NET INCOME 3,500,000

JOURNAL ENTRY FOR 2021

*IDERETSO NA NATIN DAHIL ALAM KONG NAINTINDIHAN MO NA

*REVERSAL LANG NAN ITO NG DTA

1. To record the current tax expense (paulit ulit)

Income tax expense 1,920,000

Income tax payable (30%x6,400,000) 1,920,000

2. To decrease the deferred tax asset

Income tax expense 180,000

Deferred tax asset 180,000 *Diba mas malaki na ang Accounting incom
mag-DTL ka tapos kukunin mo din naman
*instead doing to long process, shorcut m

INCOME STATEMENT PRESENTATION FOR 2020

Revenue xx
Less: Expenses xx

NET INCOME BEFORE TAX 7,000,000

Income tax expense

Current tax expense 1,920,000
decrease in DTA 180,000 2,100,000

NET INCOME 4,900,000

NAPANSIN MO ANG PINAGUUSAPAN NATIN DITO AY ACCOUNTING INCOME AND TAXABLE INCOME AGAD
LATER ON , IPASOK NATIN ANG PERMANENT DIFFERENCES KASAMA ANG TEMPORARY DIFFERENCES
TAPOS GAGAMIT PA TAYO NG NGA EXPENSE ACCOUNT, REVENUE ACCOUNT AND BALANCE SHEET ACCOUNTS
YUNG TIPONG MAGCOCOUMPUTE TAYO NG ACCOUNTING INCOME AND TAXABLE INCOME
BAGO NATIN MADETERMINE ANG CURRENT TAX EXPENSE, DTL AND DTA
ETC ETC
 * Dito pa lang makikita mo na mas mataas ang TAXABLE INCOME kesa sa ACCOUNTING INCOME
*Therefore TIAI or Deferred tax asset
*Mas mataas daw ng 600,000 ang TI sa AI

* Nakita mo yung temporay difference na sinasabi niya?

*Kaya siya tinawag na temporary difference dahil panandalian lang
*Narereverse kasi sya the following year(s)
*NET BALANCE ON DECEMBER 31, 2021 IS NEITHER DTL NOR DTA KASI ZERO NA

IX kasi, ang credit niya ay INCOME TAX BENEFIT.

RSE MO DIN KASI IN THE FUTURE ANG INCOME TAX BENEFIT SA INCOME TAX EXPENSE
dahil "BENEFIT" means paliliitin niya ang expenes. Ang expense na pinaguusapan
ay INCOME TAX expense.
 ang entry ni VALIX:

Deferred tax expense 180,000

Inocme tax Benefit 180,000 *gusto lang niya siguro ipakita siguro kung magkano ang
ang income tax benefit. Obvious naman na kasi dahil DTA
natural may income tax benefit

s malaki na ang Accounting income. Kung gusto mong pahabain ang entry
ka tapos kukunin mo din naman ang cumulative balance.
doing to long process, shorcut mo na. ideretso mo nang icredit ang DTA
COME AGAD

HEET ACCOUNTS
NG INCOME
 magkano ang
a kasi dahil DTA