Deferred Tax Liabilities in Financial Accounting

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This video shows what a deferred tax liability is in Financial Accounting. A deferred tax liability is an increase in tax payable in future years due to a temporary timing difference. For example, if a firm uses straight-line depreciation for book purposes this will lead to a temporary tax difference because accelerated depreciation is used for tax purposes. Thus, in the early years of the asset's life the amount of depreciation recorded for tax purposes wil exceed the amount of depreciation for book purposes (the excess tax depreciation over book depreciation multiplied by the tax rate is the increase in the deferred tax liability account). This difference will reverse in the later years of the asset's life when the book depreciation exceeds the tax depreciation (this will decrease the deferred tax liability account).
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Опубликовано:

1 окт 2016

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Комментарии : 91

@katrenapurdie6840 7 лет назад

This is exactly the way I like to be taught. The video is simple to follow and he does a great job of explaining the process and even providing journal entries for more clarity.

@annenglish9171 7 лет назад

I reallllly needed someone to simplify this for me - this was PERFECT - thank you very much! I was about to scream :)

@gulnoradjamalova3437 5 лет назад

Wow! I admire your ability to explain in easy language. I am grateful for your videos, wish you all the best! You are the greatest tutor!

@marcandre8832 7 лет назад

Used this to study for my intermediate accounting final exam. Thanks Ed!

@anasislam8006 Год назад

I'm a Chartered Accountant student. Can't express how much you helped me through your videos. May god bless you with all the happiness in the world. Love from Bangladesh 🇧🇩

@ShivaPremi3708 5 лет назад

Thank you so much for this video. The teaching style is ingenious wisdom.

@yuliataylor6884 2 года назад

This was a MUCH better and easy-to-follow explanation than my lecture. Thank you!

@ahrensean 7 лет назад

Thank you sir! Excellent video! This helped me a WHOLE lot. The language in my textbook was too dense and I just wasn't understanding it the way my professor was explaining it. I appreciate the examples that you gave and how you really broke things down.

@chelseaz.3584 6 лет назад

Always amazed when I come to your channel! I struggled for so long with these, but watching your videos makes it click. Thank you for everything you've done here! You ought to write a CPA review course.

@Edspira 6 лет назад

Glad to hear you're finding the videos useful! One of these days I'll find the time to put together a CPA review course, hopefully in the next year or two :)

@agathaventers7430 5 лет назад

That would be wonderful!!

@PrissyLungs 7 лет назад

Thank you so much for these. You are saving my life in Intermediate 2

@jonathonwright594 7 лет назад

Same here! This has been the only concept I've struggled with so far.

@gauravjhariya9078 6 лет назад

The way you deliver and makes us understand the topic- Impeccable style of teaching. I am gearing up for my FAR exam in next couple of months and before I start any topic from my Becker material I ensure that I listen to your videos to understand the topics even better. Appreciate your style of teaching. Thanks.

@Edspira 6 лет назад

No problem! Thank you for the kind words. I hope you ace the exam!

@gauravjhariya9078 6 лет назад

Thanks!!! Keep up the fantastic work :)

@trevorcote9139 6 лет назад

Hey, I appreciate you putting these on RU-vid so much! They have been a huge help for me understanding these topics. Not sure if you still are making videos or not, but I think it would be cool, and also a huge help if you posted some walk through practice problems for the topics. Like maybe giving us a problem, an opportunity to independently solve it, then walking us through the answer. Just an idea if you were looking to do more with this stuff. Thanks!

@Edspira 6 лет назад

I did start a website (www.Edspira.com) that has a bunch of free materials. I have made exercises and quizzes for the Financial Accounting course and about half of the Managerial Accounting course. This summer I'll have more free time to make more videos and written content for Edspira. I'm planning on focusing predominantly on tax and audit. I'm definitely planning on making this bigger...so stay tuned. Thanks Trevor!

@nadinebradley6238 4 года назад

Thank you so much for this!!! Very helpful and visual. Just the type of explaining I needed!

@emadabushaaban 6 лет назад

Thanks a lot, amazing lectures, keep the good work, wish you keeping the good attitude

@Edspira 6 лет назад

Thank you!

@samsyeung Год назад

ur literally saving my life w all ur videos...keep up the great work!

@Edspira Год назад

Thank you!

@joonpark12121 7 лет назад

serious appreciation @Education Unlocked . I use your awesome videos as supplementary material for my CPA exams. unbelievable how u provide such wide array of topics of materials.

@Edspira 7 лет назад

Thank you for the kind words my friend. I hope you do excellent on the CPA exam. There is a strong need for accountants right now, so you are on track for a great career!

@kristinameadows1787 7 лет назад

I second this. I am also using these videos as supplementary material for my CPA exams! REG is killing my soul. haha

@GRACIELOU21 6 лет назад

Another thumbs up here! 3 exams down and one to go....and its FAR so thank you so much as this feels like an uphill battle.

@brit411jc 11 месяцев назад

#Same

@devinhsu1305 3 года назад

Your video is just so helpful to understand everything

@vivalacarlo 3 года назад

totally better at explaining this than Becker. Their explanations weren't bad up until this topic smh. My professor taught it better too but it's been so long but you made it easy to understand. Thank you so much!

@svitlanabendas3517 5 лет назад

Thank you so much! It is become clear now!

@tabbarsg 3 месяца назад

beautiful explanation, thanks man :)

@kshetrisurendra3296 5 лет назад

great way to describe things. appreciale

@narasimhap8884 6 лет назад

THANKS A LOT FOR THIS VIDEO

@brit411jc 11 месяцев назад

This makes a lot of sense.... Thank you!!!!

@Edspira 11 месяцев назад

😀

@noblegirl1991 7 лет назад

Great explanations

@mrcallmepeter 2 года назад

Thank you this is so clear

@seandesalero6594 4 года назад

Excellent Explanation

@oliviachen3337 7 лет назад

thx for making these amazing videos

@Edspira 7 лет назад

Sure thing!

@Laktyvrs22232 7 лет назад

very helpful!!!

@pythonprogramming2765 2 года назад

Good stuff man!

@Edspira 2 года назад

Glad you liked it!

@saifal-salman1532 7 лет назад

Just WOOOOOOOOOOOOOOOOOOOOOOOW. thank you so much

@Edspira 7 лет назад

No problem my friend!

@jerrydevine6033 Год назад

Absolutely fuego

@josephbadudao0116 4 года назад

excellent presentation. You have my subscription.

@josephbadudao0116 4 года назад

I'm currently reviewing for my preboard exams. This helped a lot!

@laettoooo 7 лет назад

Thank you sir!

@Edspira 7 лет назад

No problem!

@mark91345 6 лет назад

You made it so easy to understand this concept. Thank you.

@Edspira 6 лет назад

No problem!

@igi-chan 6 лет назад

You explained this very well!! Also, you sound like John C Reilly lol 👍🏻

@Edspira 6 лет назад

Thanks! I've been getting the John C Reilly comment a lot lately. I don't hear it, but then again your voice always sounds different to yourself. It's got to be the Chicago accent 😆 Best of luck to you in your studies!

@AA-ew3ld 2 года назад

Very informative . I wish that theres videos providing info on what forms to use and where to enter the Net operating loss carryforward to realize it later in life and how to elect valuation for Tax debt forward etc etc. Specially for small business. They have NOL videos everywhere for stocks but nonee for business passthrough emtities. Is schedule D enough for realising this. Also how can we cure any previous years messup by not claiming or submitting the right forms to be considered for carry forward. Would be very informative as well. Thanks!!!

@taiba685 6 лет назад

How are the tax depreciation figures calculated?

@meera1234able 5 лет назад

Tnx

@CarlyEdits 2 года назад

Do you happen to do virtual tutoring?

@jasondeng487 2 года назад

excellent explanation. Do you have a series of stock-based compensation? I like your video a lot.

@Edspira 2 года назад

Thank you! I don't have any videos on stock-based compensation yet, but I'll add that topic to my to-do list!

@johnlewis7476 6 лет назад

Quick question, aren't you suppose to subtract the tax deduction before calculating tax expense & payable? e.g. yr 1: Dr. Tax Expense [(100000-12000) x 0.4] 35200; Cr. Income Tax Payable [(100000-20000) x 0.40)] 32000; Cr DTL 3200; ? What am I doing wrong? Love your videos, very helpful. Thank you.

@chinmoychowdhury2038 Год назад

Please explain the same thing for permanent differences. Here you have shown temporary differences cases. But what will happen to income tax expenses and the journal entry if permanent differences happen..

@waoots 4 года назад

Can anyone explain where he got the tax depreciation amount of 20000, is that a notional amount?

@Mozarie-00 2 года назад

Where are the amounts for the tax depreciation coming from? and the pre-tax book income?

@edgarmiranda9627 2 года назад

I wish you would have worked out how you got the numbers

@pigslefats Год назад

"An increase in taxes payable in future years" is a DTL. I'm trying to understand this concept as it pertains to years 4 and 5. Does it mean that the income tax payable figure which we might otherwise expect to be the same as the income tax expense figure, as in year 3, has been increased in effect, by transferring the DTL figure across to income tax payable thus resulting in "an increase in taxes payable". So, we are in effect "increasing " book tax to match "tax book" tax -we're grossing up the income tax payable account? I don't know if this makes any sense. Am I correct?

@nareshbandaru4943 4 года назад

Can some one plz tell me how we got 20000 as tax depreciation ?

@HOIIIIIIIIIIIII198e3 7 лет назад

how do you determine the tax depreciation for each year?

@user-qr5hp4ok3e 5 лет назад

He made a mistake, it was supposed to be $24,000 on the first year....using the double declining balance

@user-qr5hp4ok3e 5 лет назад

Sorry, that's assuming if he made meant ddb when he said accelerated

@cultfinance9870 3 года назад

I believe the tax depr. has changed under the tax cuts and jobs act where you can depreciate 100% of your asset in year 1.

@calebwilliams4real 3 года назад

yeah for Tax shouldnt it be 100,000 - 20,000 for year 1 instead of 100,000 - 8,000

@bbqking10 6 лет назад

U should do videos for CPA sections

@Edspira 6 лет назад

Great idea - that is on my agenda for the coming year

@bbqking10 6 лет назад

But I will say that so FAR (pun intended) most the areas Ive needed help on I have found from u just by a basic youtube search of the topic.

@racerx1326 4 года назад

Why is "taxable income" = "Pre-tax book Income" - "Excess Tax over book". To calculate "taxable income", I thought you subtract the full amount of depreciation from pre-tax book income. I'm confused that "Excess Tax over book" is used instead of the full amount of depreciation.

@shaunaweisser8575 5 лет назад

Confused on how you get the tax depreciation??

@ivyrivera6676 3 года назад

Sumof the years method. (5*6)/2 Y1 = 60K * 5/15 Y2 = 60K * 4/15 Y3 = 60K * 3/15

@letsglowwqueen 2 года назад

Sir, I suppose that the year 1 Tax depr. should be 24000 right?😅Sorry if that was a foolish question. In double declining model, we take the reciprocal of the useful life of the asset and doubling it, this rate is applied to the depreciable base. That is, 1/5; 20% after doubling it it will be 40% = 60000 * 40% = 24000. Thank you. Appreciate your response.

@letsglowwqueen 2 года назад

Its me again or otherwise you might have taken the SYD method, In that case the value can be 2000. Thank you. year 1: 5/15 = .3333 = 60000 * .33333 = 20000 (Rounded)

@maleaccountant7198 4 года назад

Sir I have a question on why there is a DTL if the Carrying amount is greater than the Tax base and DTA if it's the other way around.

@chakkaftw7008 4 года назад

It is because if your carrying amount is, let's say, 100 and your taxable income is only 90, instead of paying taxes on that full 100, you are only paying it on that 90. Therefore, you aren't paying taxes on 10 (100-90) and therefore you will owe it in later years. If the tax income was 110, you are paying more taxes now than what the book would pay, so it would be an asset as you would pay less taxes later on.

@joym1925 5 лет назад

Tax depreciation? Where is the number coming from?

@meera1234able 5 лет назад

Joy M. Its SLM basis 20% p.a

@rishabhdowarah663 2 года назад

haha tom hanks cameo

@geludan1 6 лет назад

IF the money that is saved from tax is marked liability which you still have to pay, then whats the point... the whole point speeding up deprecation is for paying less tax in total, this is weird...

@teerificbitch 5 лет назад

Time value of money.

@davidkupfer936 5 лет назад

why is it 100 000 - 8000? wouldnt it be 100 000- 28000?

@orlandolazardi9818 3 года назад

I know this is an old comment but how do you get 28000? It’s -8000 because you are reversing the affects remember that first you depreciate an asset and then since you are depreciating on a faster basis in tax you have a higher balance initially. After a couple years you depreciate at a much slower rate since you took more tax in the beginning to make it all equal