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For Delany has Extra revenue for book purposes 180,000-150,000 =30,000 .(Extra income = Extra Tax) Delany has liability for coming year of 30,000 *0.35 = 10500 called deferred Tax liability .the 30,000 it could be Account Receivable depend how it gonna be recognized for next years for Tax purposes for example when it s payed by customer it s gonna increase our tax liability (more income for Tax purposes = more Tax ) now Tax liability > Tax Expenses the difference gonna offset our deferred Tax liability repeatedly through coming years till initial All extra Revenue 30,000 turn to cash.
For Maureen : Current Tax Expense =200,000 *0.45 = 90,000 Deferred Income Tax Expense = 300,000 *0.45 =135,000 Tax Liability =90,0000 Deferred Tax Liability =135,000 if 300,000 reverse next year : Deferred Tax Liability 135,000 Tax Liability 135,000 Translation to English : The owner : I have Tax expense of 225,000 (500,000 *0.45), I owe 90,000 for this year (current) and 135,000 (Deferred or Long Term) The Owner Next year (Tax reverse) : I have to pay Extra 135,000 for this year so 135,000 is no more long Term it is become short Tern or current . I cancel out Deferred tax 135,000 and I Create current Tax liability 135,000