Accounting For Income Tax

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 (This is ELIMINATED IN ACCOUNTING INCOME TO ARRIVED AT ACCOUNTING INCOME SU

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:
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.
D AT ACCOUNTING INCOME SUBJECT TO TAX.. Tandaan mo ito)
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

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 asset 6
Income tax payable 30
when tax is paid:

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
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.
c. When the TAX BASE OF A LIABITIY IS LOWER THAN THE CARRYING AMOUNT
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
Adjust for PERMANENT DIFFERENCES
Less: NONTAXABLE REVENUE (XX)
Add: NONDEDUCTIBLE EXPENSES XX
ACCOUNTING INCOME SUBJECT TO TAXXX TAXABLE INCOME
Mulitply: tax rate xx% Mulitply: tax rate
INCOME TAX EXPENSE XX INCOME TAX PAYABLE OR ITP OR CTE
(TOTAL INCOME TAX EXPENSE - TITE) (CURRENT TAX EXPENSE - CTE )
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
ANG FORMULA SA TAAS PWEDE MO ISHORTCUT. PAGDUGTUNGIN MO ANG ACCOUN
ACCOUNTING INCOME PER BOOK XX

PERMANENT DIFFERENCES
NONDEDUCTIBLE EXPENSE XX
NONTAXABLE REVENUE (XX)
ACCOUNTING INCOME SUBJECT TO TAX XX
TEMPORARY DIFFERENCES
TAXABLE TEMPORARY DIFFERENCES (DTL) (XX)
DEDUCTIBLE TEMPORARY DIFFENCES (DTA) XX
TAXABLE INCOME XX
*PWEDE MO NAMAN ICOMPUTE FROM TAXABLE INCOME PAPUNTANG ACCOUNTING INCOME,

MO LANG ANG FORMULA.
TEMPORAY DIFFERENCES
ACCOUNTING LESS TAX RETURN
XX TAXABLE (REVENUE) TEMPORARY DIFFERENCE XX
(XX) DEDUCTIBLE (EXPENSES) TEMPORARY DIFFERENCE (XX)
XX DIFFERENCE XX
xx%
XX Mulitply: tax rate 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
GIN MO ANG ACCOUNTING INCOME AT TAXABLE INCOME
TAX RATE
*ELIMINATE ITO FROM THE ACCOUNTING INCOME
XX% TOTAL INCOME TAX EXPENSE
*YUNG CUMULATIVE NITO AY DTL OR DTA

*PERO JOURNALIZED SEPARATELY ANG DTL AT DTA PARA LANG MAY CONTROL/MONITORING
XX% CURRENT TAX EXPENSE
UNTANG ACCOUNTING INCOME, BALIKTARIN

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
* actually ito yung NET amount ng entry mo ng INCOME TAX EXPENES sa taas
Income tax expense xx * Yung difference na lang ng DTL at DTA ang isingit mo pagkatapos mo icompare
Income tax payable xx sa makukuha mong TAX sa ACCOUNTING INCOME x TAX RATE
E X TAX RATE) 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
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
*TAKE NOTE NA WALANG BINANGGIT NA PERMANENT DIFFERENCES. PAG MERON, IADJUST MO ANG ACCOUNTING INCOME…
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

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

*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 asset 150,000
*therefore kung ishort cut mo ganito lang pala ang entry

*Di ba ganyan ang entry ni VALIX?

*The NEGATIVE DIFFERENCE WILL DECREASE THE DTL
Revenue xx
Less: Expenses xx
Income tax expense

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

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 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

*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

*therefore kung ishort cut mo ganito lang pala ang entry

*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
Revenue xx
Less: Expenses xx
Income tax expense

Decrease in DTL (150,000) 2,100,000

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 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 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 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?

MO ANG ACCOUNTING INCOME…
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

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
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

2.To record the deferred tax asset
*Hindi ko susundin si Valix para di ka malito, ideretso ko na

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

*susundin natin itong entry in
Revenue xx
Less: Expenses xx
Income tax expense

Income tax benefit -180,000 1,500,000
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 payable (30%x6,400,000) 1,920,000
2. To decrease the deferred tax asset

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
Revenue xx
Less: Expenses xx
Income tax expense

decrease in DTA 180,000 2,100,000
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
*susundin natin itong entry in the next illustration
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
g magkano ang
a kasi dahil DTA
ILLUSTRATION : DEFERRED TAX ASSET AND DEFERRED TAX LIABILITY (IA2 20
Pagsabay - sabayin na nating ipasok ang mga sumusunod
1. DTL
2. DTA
4. TEMPORARY DIFFERENCES
AN entity reported the following for the year-ended December 31, 2020
Accounting income per book 6,000,000

Nondeductible expenses 500,000
Nontaxable revenue 300,000
Doubtful accounts 200,000
Estimated warranty cost that had been recognized
as expense in 2020 when the product sale were
made but is deductible for tax purposes when paid 400,000
Accounting depreciation 600,000
Tax depreciation 800,000
Gross income on installment sale included
in accounting income but taxable only in 2021 100,000
Income tax rate 30%
*ito ang tatandaan mo dito sa topic na ito, ang target natin is to ARRIVED TO TAXABLE INCOME
Kasi hindi susundin ni BIR ang ACCOUNTING INCOME NATIN FOR TAX PURPOSES
THEREFORE, iadjust natin ang accounting income by
1. eliminate permanent differences
2. adjust for temporary differences
SOLUTION:
TAX RATE
ACCOUNTING INCOME PER BOOK 6,000,000.00
NONDEDUCTIBLE EXPENSE 500,000
NONTAXABLE REVENUE (300,000)
ACCOUNTING INCOME SUBJECT TO TAX 6,200,000 30%
TAXABLE TEMPORARY DIFFERENCES(TTD OR DTL)
Excess tax depreciation (200,000)
Gross income on installment sale (100,000)
DEDUCTIBLE TEMPORARY DIFFENCES(DTD OR DTA)
Doubtful accounts 200,000
Estimated warranty cost 400,000
TAXABLE INCOME 6,500,000 30%
THE PERMANENT DIFFERENCES DO NOT GIVE RISE TO DEFERRED TAX ASSET OR DEFERRED TAX LIABILITY AND THUS
ELIMINATED FROM THE REPORTED ACCOUNTING INCOME
JOURNAL ENTRY:
1. TO RECORD THE CURRENT TAX EXPENSE

Income tax payable (30% x 6,500,000) 1950000
2. To record deferred tax ASSET (DEDUCTIBLE TEMPORARY DIFFERENCES)
Deferred tax asset 180000

Income tex benefit 180000
COMPUTATION:
Doubtbul accounts 200,000

Estimated warranty 400,000
Tota DTD 600,000
multiply by tax rate 30%
DEFERRED TAX ASSET or DTA 180,000
3. To record the deferred tax liability

COMPUTATION:
Excess tax depreciation(800,000-600,000) 200,000

Gross income on installment sale 100,000
TOTAL TTD 300,000
multiply by tax rate 30%
DEFERRED TAX LIABILITY 90,000
NET DEFERRED TAX EXPENSE OR BENEFIT
The difference between the chagne in deferred tax asset and the change in deferred tax liability
is the NET DEFERRED TAX EXPENSE OR BENEFIT
Observe the following using the preceding illustration:
Tax benefit from increse in deferred tax asset (180,000)

Tax expense from increase in deferred tax liability 90,000
NET DEFERRED TAX BENEFIT (90,000)
Nedless to say, if the INCOME TAX EXPENSE FROM THE INCRESE IN DEFERRED TAX LIABILITY
is more than the tax benfit from the increase in DEFERRED TAX ASSET, there is a
NET DEFERRED TAX EXPENSE.
*Ang sabi kapag ang scenario ay ganito:
Tax benefit from increse in deferred tax asset 90,000

Tax expense from increase in deferred tax liability 180,000 mas malaki ang dta
NET DEFERRED TAX EXPENSE 90,000
GETS? So kapag tinanong ang net deferred tax expense at net deferred
tax liability, lalruin mo lang ang temporary deferrences or the DTA and DTL
TAX LIABILITY (IA2 2020 PAGE 534)
*dito pa lang malalaman mong PERMANENT DIFFERENCES

*this are included in the computation of ACCOUNTING INCOME BUT NEVER IN THE TAXABLE INCOM
*DEDUCTIBLE TEMPORARY DIFFERENCES, BAKIT? KASI NGA DEDUCTED NA FROM BOOK PERO HIND
*Therefore, iadd mo sya. ICONSIDER MO FOR TAX PURPOSES PAG MAY ACTUAL CASH PAYMENT N
dahil CASH BASIS nga diba ang BASEHAN NI BIR sa computation ng INCOME SUBJECT TO TAX
*TAXABLE TEMPORARY DIFFERENCES ITO. TINGNAN MO, MAY COMPARISON NG COMPUTATION N

BOTH TAX AND ACCOUNTING. IBIG SABIHIN, PAREHAS ITONG KINOCONSIDER TALAGA NI ACCOUN
IN COMPUTING DEPRECIATION. ITS JUST THAT, WE HAVE TO FOLLOW HOW MUCH THE "SHOULD B
TO ARRIVE AT A TAXABLE INCOME
*TINGNAN MO YUNG DOUBTFUL ACCOUNTS AT ESTIMATED WARRANTY. BAKT HINDI TINAWAG N
DAHIL HINDI TALAGAN TINATANGGAP NI BIR NA ISAMA SA COMPUTATION ANG DALAWANG YAN "
ACTUALLY PAID NA. HINDI GAYA NG DEPRECIATION NA TALAGANG SINASAMA SA PAGCOMPUTE N
DAHIL DI BA ASSUMED CASH PAID NAYUNG PROPERTY NA PINANGGALINGAN NG DEPRECIATION?
*HWAG KANG MALITO SA PAGDETERMINE NG TEMPORARY DIFFERENCES WHETHER DEDCUTIBLE

SYA OR TAXABLE TEMPORARY DIFFERENCE
*ELIMINATE ITO FROM THE ACCOUNTING INCOME
1,860,000 TOTAL INCOME TAX EXPENSE
*DTL
-90000 *Mapapansin mo kung TAXABLE TEMPORARY DIFFERENCES SYA. kapag ito ay "IBABAWAS SYA"
*Mapapansin mo din kung DEDUCTIBLE TEMPORARY DIFFERENCES SYA. "INA-ADD SYA"

180000 *DTA
1,950,000 CURRENT TAX EXPENSE
AX LIABILITY AND THUS
GANITO NA LANG GAWA KA NG CODE KUNG NAHIHIRAPAN KA MAGMEMORIZE
DTD -DTA- ADDED SA AI (DEDUCTIBLE TEMPORARY DIFFERENCES ADDED TO ACCOUTNI

TTD - DTL - DEDUCTED SA AI (TAXABLE TEMPORARY DIFFERNCES DEDUCTED SA ACCOUN
ACCOUNTING INCOME BEFORE TAX 6,000,000

INCOME TAX EXPENSE
CURRENT TAX EXPENSE 1,950,000
INCOME TAX BENEFIT (180,000)
DEFERRED TAX EXPENSE 90,000
NET INCOME TAX EXPENSE 1,860,000
NET INCOME AFTER TAX 4,140,000
*Observe that the ACCOUNTING INCOME SUBJECT TO TAX OF 6,200,000 MULTIPLIED BY 30%
EQUALS 1,860,000 WHICH IS THE TOTAL INCOME TAX EXPENSE FOR THE YEAR.
COMPARISON BETWEEN ACCOUNTING INCOME AND TAXABLE INCOME USING THE ILLUSTRATION
TAX RATE
ACCOUNTING INCOME 6200000 30% 1,860,000.00 *ITO YUNG TOTAL INCOME
TAXABLE INCOME 6500000 30% 1,950,000.00 *CURRENT TAX EXPENSE, ITO
DIFFERENCE (90,000.00) *ITO YUNG INCOME TAX BE
*ITO AY CURRENT TAX ASSE
*AYAN NAIPASOK NA NATIN ANG BAGONG TERM - CURRENT TAX ASSET
*NAGKAKAROON KA NG CURRENT TAX ASSET KAPAG MERON KANG NET DEFERRED TAX EXPENSE O
*IBIG SABIHIN, DTA IS MORE THAN DTL
CURRENT TAX LIABILITY
A CURRENT TAX LIABILITY is a CURRENT TAX EXPENSE or the AMOUNT OF INCOME TAX ACTUALLY
OR ACTUALLY NA BABAYARAN NG CASH SA BIR. THIS IS CLASSIFIED AS CURRENT TAX LIABILITY
ITO YUNG KAPAG MINULTIPLY MO ANG TAXABLE INCOME SA TAX RATE DIBA. Using the ILLUSTRAT
ACCOUNTING INCOME 6200000 30% 1,860,000.00 *ITO YUNG TOTAL INCOME

TAXABLE INCOME 6500000 30% 1,950,000.00 *CURRENT TAX EXPENSE, ITO
DIFFERENCE (90,000.00) *ITO YUNG INCOME TAX BE
*ITO AY CURRENT TAX ASSE
*Mas nataas ang TAXABLE INCOME kesa sa ACCOUNTING INCOME
CURRENT TAX ASSET
malaki ang dta If the amount of tax already paid for the current periods EXCEEDS the amount actually payable for
the excess is recognized as CURRENT TAX ASSET
Ibig sabihin, kapag mataas taxable income kesa sa accounting income yung difference is the curren
ITO ang LOGIC, diba nung nagprepare ka ng INCOME STATEMENT MO, akala mo yun na ang basis
ng INCOME TAX EXPENSE MO. Pero actually PER ACCOUNTING BOOK, yun yung nirecord mong INC
mo base sa ACCOUTING INCOME MO before any adjustment ng permanent and temporary differen
Lumalabas ngayon na base sa ILLUSTRATION, mas mataas pala ang ACTUAL na babayaran mong IN
kesa sa INAAKALA mo dahil per BIR, you should compute your tax base on TAXABLE INCOME na 6,5
ACCOUNTING INCOME 6200000 30% 1,860,000.00 per book

TAXABLE INCOME 6500000 30% 1,950,000.00 actually to be paid
DIFFERENCE (CURRENT TAX ASSET) (90,000.00) "as if" paid in advance na ta
*Base dyan, lumalabas na P1,950,000 ang actually payable. Hindi 1,860,000 na base sa accounting
Parang lumalabas na meron kang PREPAID TAX na 90,000 (1,950,000 - 1,860,000)
Therefore meron kang CURRENT TAX ASSET na 90,000
Actually, a current tax asset is a PREPAID INCOME TAX AND SHALL BE CLASSIFIED AS CURRENT TAX
A Current tqax liability or current tax asset shall be measured USING THE TAX RATE THAT HAS BEEN
AND EFFECTIVE AT THE END OF THE REPORTING PERIOD (DECEMBER 31)
R IN THE TAXABLE INCOME
FROM BOOK PERO HINDI PA PWEDENG IDEDUCT FOR TAX PURPOSES
TUAL CASH PAYMENT NA SA EXPENSES NA ITO
SUBJECT TO TAX
N NG COMPUTATION NG DEPRECIATION FOR *Ibig sabihin, masyadong maliit yung

ER TALAGA NI ACCOUNTING AT BIR naibawas ni Accounting Income.
W MUCH THE "SHOULD BE" ADDITION OR DEDUCTION *Therefore for tax purposes, magbawas ka pa
ng 200,000 to arrive at taxable income
AKT HINDI TINAWAG NA TAXABLE TEMPORARY DIFFERENCES?
ANG DALAWANG YAN "UNLESS"
MA SA PAGCOMPUTE NG TAXABLE INCOME
AN NG DEPRECIATION? GETS MO
*Ibig sabihin, isinama na ni accounting income

WHETHER DEDCUTIBLE TEMPORARY DIFFERENCES pero sabi ni taxable income, wag! Sa 2021 mo
dapat isama. So ibabawas mo sa accounting incom
at taxable income
*Dito sa mga adjustment na ito sa accounting inco

WALA KA NAMAN TALAGANG GAGAWING ACTUAL
JOURNAL ENTRIES. MAGCOCOMPUTE LANG NAMA
TALAGA TAYO NG INCOME TAX BASE SA TAXABLE
*ANG JOURNAL ENTRY LANG NAMAN NA GAGAWI

NA IRERECORD NATIN SA LIBRO AY YUNG EFFECT L
DIFFERENCES NA ITO AS DEFERRED TAX LIABILITIES
DEFERRED TAX ASSET WHICH ARE REVERSED IN TH
FOLLOWING OR FUTURE YEARS KAPAG INALLOW N
BIR NA ISAMA SA COMPUTATION O PAGPREPARE
NG INCOME TAX RETURN. GETS
S ADDED TO ACCOUTNING INCOME TO ARRIVE AT TAXABLE INCOME RESULTING TO DEFERRED TAX ASSET)
DEDUCTED SA ACCOUNTING INCOME TO ARRIVE AT TAXABLE INCOME RESULTING TO DEFERRED TAX LIABILITY)
*PRE-TAX ACCOUNTING INCOME
*ITO YUNG BABAYARAN MO IN CASH SA BIR/ CURRENT TAX LIABILITY, THE AMOUNT ACUTALLY PAYABLE
*Ang cumulative nito meron kang makukuhang net deferred tax benefit or DTA (90,000)
*ITO YUNG NET INCOME TAX EXPENSE KAPAG IBABAWAS MO YUNG INCOME TAX BENEFIT
ULTIPLIED BY 30%
SING THE ILLUSTRATION

YUNG TOTAL INCOME TAX EXPENSE
RRENT TAX EXPENSE, ITO YUNG ACTUAL NA BABAYARANG TAX DIBA
YUNG INCOME TAX BENEFIT NET OF DEFERRED TAX LIABILITY (180,000-90,000)
AY CURRENT TAX ASSET, (FROM THE TERM INCOME TAX BENEFIT)
EFERRED TAX EXPENSE OR OR BENEFIT
NCOME TAX ACTUALLY PAYABLE

RENT TAX LIABILITY
BA. Using the ILLUSTRATION:
YUNG TOTAL INCOME TAX EXPENSE

RRENT TAX EXPENSE, ITO YUNG ACTUAL NA BABAYARANG TAX DIBA
YUNG INCOME TAX BENEFIT NET OF DEFERRED TAX LIABILITY (180,000-90,000)
AY CURRENT TAX ASSET, (FROM THE TERM INCOME TAX BENEFIT)
unt actually payable for the period,
difference is the current tax asset.

a mo yun na ang basis
yung nirecord mong INCOME TAX EXPENSE
and temporary differences.
na babayaran mong INCOME TAX
TAXABLE INCOME na 6,500,000
ally to be paid
" paid in advance na tax
0 na base sa accounting income mo.

SIFIED AS CURRENT TAX ASSET
AX RATE THAT HAS BEEN ENACTED

dong maliit yung
ting Income.
urposes, magbawas ka pa
at taxable income
a na ni accounting income
ncome, wag! Sa 2021 mo
awas mo sa accounting income to arrive
ment na ito sa accounting income

ALAGANG GAGAWING ACTUAL
MAGCOCOMPUTE LANG NAMAN
COME TAX BASE SA TAXABLE INCOME
RY LANG NAMAN NA GAGAWIN NATIN

N SA LIBRO AY YUNG EFFECT LANG NG
O AS DEFERRED TAX LIABILITIES OR
T WHICH ARE REVERSED IN THE
URE YEARS KAPAG INALLOW NA NI
MPUTATION O PAGPREPARE
PRESENTATION OF DEFERRED TAX ASSET OR LIABILITY
Pas 12 par 70 provides that when an entity makes a distinction between current and
noncurrent assets and liabilities, it shall NOT classify DEFERRED TAX ASSET AND
DEFERRED TAX LIABILITIES, it shall NOT CLASSIFIY:
DEFERRED TAX ASSES AS CURRENT ASSETS
DEFERRED TAX LIABILITIES AS CURRENT LIABILITIES MALI

ACCORDINGLY, IT SHALL BE CLASSIFIED AS
DEFERRED TAX ASSET AS NONCURRENT ASSET

DEFERRED TAX LIABILITY AS NONCURRENT LIABILITIES TAMA
REGARDLESS OF REVERSAL PERIOD!!!
NAGETS MO BA?
OFFSET OF DEFERRED TAX ASSET AND DEFERRED TAX LIABILITY

*Sa previous presentation ko, pinapakita ko yung NET difference ng dalawa. Merong sinasabi ang PAS:
Under PAS 1, ASSETS AND LIABILITIES, SHALL NOT be offset UNLESS required or permitted by
another standard.
*Tama nga naman. So hindi daw dapat, inooffset. Kaya yung presentation ni
VALIX, separate yung recording niya ng: TAXABLE TEMPORARY differences
resulting to DTL or DEDUCTIBLE TEMPORARY differences resulting to DTA na may
INCOME TAX BENEFIT.
*Naalala mo ba yung sinasabi kong "CUMULATIVE"
*Pero hindi absolute na bawal daw. May sinasabi si PAS 12
PAS 12 par 74, provides that an entity shall OFFSET a DEFERRED TAX ASSET AGAINST DEFERRED TAX LIABILITY WHEN:
a. The deferred tax assest and deferred tax liability relte INCOME TAXES levied by the
SAME TAX AUTHORITY
b. The entity has a LEGAL ENFORCEABLE RIGHT to offset a curret tax asset against a Curent
tax liability.
For the meantime, for purposes of discussion, sundan natin ang process ni VALIX
Pero, for board exam purposes, gamitin mo yung mga short cut technique to analyze different
scenarious.
INTRAPERIOD AND INTERPERIOD TAX ALLOCATION
INTRAPERIOD TAX ALLOCATION -is the allocation of INCOME TAX EXPENSE to the
various revenues that brought about the tax
Thus, THE TOTAL INCOME TAX EXPENSE IS ALLOCATED TO INCOME

1. FROM CONTINUING OPERATION
2. DISCONTINUED OPERATIONS
3. PRIOR PERIOD ERRORS OR ITEMS DIRECTLY
CHARGED OR CREDITED TO RETAINED EARNINGS
*ibig SABIHIN : ALLOCATION IS WITHIN THE YEAR LANG
INTERPERIOD TAX ALLOCATION - is the recognition of DEFERRED TAX ASSET

OR DEFERRED TAX LIABILITIES
*Ibig sabihin, allocation in the years affected by the temporary

differences.
D TAX LIABILITY WHEN:
ILLUSTRATION 4 - COMPREHENSIVE (IA2 2020 PAGE 538)
Before we proceed, introduce ko lang ang topic for the comprehensive illustration:
STATEMENT OF FINANCIAL POSITION APPROACH
*FINANCIAL POSITION - BALANCE SHEET

*GAGAMIT KASI TAYO NG MGA BALANCE SHEET ACCOUNT TO COMPUTE
FOR DIFFERED TAX ASSET AND DEFERRED TAX LIABILITIES
*PREVIOUSLY DUMIRETSO KAAGAD TAYO SA ACCOUNTING INCOME
AND TAXABLE INCOME
*DITO SA TOPIC NA ITO, GAGAMIT TAYO NG BALANCE SHEET ACCOUNT
TO EFFECT A DTL OR DTA
*SO GAGAMIT TAYO NG IBANG TAX BASE
*USUALLY ANG MGA TAX BASE NA ITO AY RELATED SA MGA EXPENSES
NG TANGILE KAGAYA NG DEPRECIATION (PPE) OR MGA EXPENSES NG
IN INTANGIBLE KAGAYA NG AMORTIZAITON (COMPUTER SOFTWARE, ETC)
To account for a deferred tax asset or liability, a statement of financial position that
shows all the assets and liabilities at their carrying amount is first prepared.
The following procedures are then followed:
1. Determine the TAX BASE of the assets and liabilities in the statement of
financial position
2. Compare the carrying amounts with the tax base
3. The difference between the carrying amount and tax base

normally will result to a DEFERRED TAX ASSET OR LIABILITY
4. PERMANENT DIFFERENCES DO NOT GIVE RISE TO DEFERRED

TAX ASSET OR LIABILITY
5. Apply the tax rate to the TEMPORARY DIFFERENCES
6. Determine the beginning and ending balance of deferred tax asset

or liability
7. Recognized the NET CHANGE BETWEEN THE BEGINNING AND ENDING

BALANCE OF THE DEFERRED TAX ASSET OR LIABILITY
ILLUSTRATION:
On December 31, 2020, the accounts of EASY COMPANY have the SAME BASIS for
accounting and tax purposes, except:
Carrying amount Tax base

Computer software cost 4,000,000 0
Building 47,500,000 45,000,000
Heto ang mga paliwanag ng table above:

In January 2020, Easy Company incurred COST of P5,000,000 for the development
of a computer software product
Considering the technical feasibility of the product, this cost was capitalized and
amortized over 5 years for ACCOUNTING PURPOSES using straight line method.
Computer software cost 5,000,000

Amortization for 2020 (5,000,000/5) -1,000,000
Carrying amount-12/31/2020 4,000,000
The Computer Software cost has a ZERO tax base because the total amount was
EXPENSED in 2020 for TAX PURPOSES.
LETS ANALYZE THE BUILDING
The building was acquired on January 1, 2020 for 50,000,000 and depreciated using
the straight line method at 5% for ACCOUNTING PURPOSES and 10% for TAX PURPOSES
ACCOUNTING BIR-TAX RETURN
BUILDING 50,000,000 BUILDING

Accum Depreciation(5,000,000 X 5%) 2,500,000 Accum Depreciation (5,000,000 X 10%)
CARRYING AMOUNT 47,500,000 CARRYING AMOUNT (Tax base)
AYAN ANG KABUUANG KWENTO. SO ISUMMARIZE NATIN AT SILIPIN NATIN YUNG FORMULA
ACCOUNTING INCOME PER BOOK XX

NONDEDUCTIBLE EXPENSE XX
NONTAXABLE REVENUE (XX)
ACCOUNTING INCOME SUBJECT TO TAX -
TAXABLE TEMPORARY DIFFERENCES(TTD OR DTL) (XX)
DEDUCTIBLE TEMPORARY DIFFENCES(DTD OR DTA) XX
TAXABLE INCOME -
PAREHAS NA DTL ANG DIFFERENCES FOR ACCOUNTING SOFTWARE AND BUILDING DIBA?
TINGNAN MO NGAYON ANG FORMULA KUNG SAAN MO ILALAGAY! E DI SA TTD!!!!!
SUMMARY NG TAXABLE TEMPORARY DIFFERENCE
Computer software 4,000,000

Building (47,000,000-45,000,000) 2,500,000
TOTAL TTD OR TAXABLE TEMPORARY DIFFERNCE 6,500,000
YAN LANG NAMANG ANG PINAGKAIBA NG TAXABLE INCOME AT ACCOUNTING INCOME

DIBA! SO YAN LANG ANG KAILANGAN NATIN TO DETERMINE WHETHERE DTL AND DTA
E DTL ANG LUMABAS NA RESULTA.
ACCOUNTING INCOME PER BOOK (pretax accounting income) -

NONDEDUCTIBLE EXPENSE -
NONTAXABLE REVENUE -
ACCOUNTING INCOME SUBJECT TO TAX -
TAXABLE TEMPORARY DIFFERENCES(TTD OR DTL) 6,500,000
DEDUCTIBLE TEMPORARY DIFFENCES(DTD OR DTA) -
TAXABLE INCOME 6,500,000
Mulitply by tax rate 30%
DEFERRED TAX LIABILITY 1,950,000
JOURNAL ENTRY
The carrying amount of an asset is HIGHER than the tax base, the difference
is a FUTURE TAXABLE TEMPORARY DIFFERENCE and therefore, there is
DEFERRED TAX LIABILITY. The income tax rate is 30%
Journal entry to record the deferred tax liability on December 31, 2020:

Deferred tax liability 1,950,000
COMPUTATION OF TAXABLE INCOME

*dito kukumpletuhin natin ang table, lagyan natin ng value ang accounting inocme
If the pretax accounting income for 2020 is P10,000,000, then the TAXABLE INCOME
can now be computed as follows:
ACCOUNTING INCOME PER BOOK (pretax accounting income) 10,000,000

ACCOUNTING INCOME SUBJECT TO TAX 10,000,000
Computer software cost entirely expensed in 2020 (4,000,000)
Excess tax depreciation (2,500,000)

NAKITA MO YANG MALAKING ARROW NA YAN? YUNG SUM NIYAN (1,950,000 - 1,050,000 =3,000,000) IS ACTUALLY THE TOTA
*Kaya nga sinasabi ko na ang total income tax expense is base sa ACCOUNTING INCOME x Tax rate, ang break down
yung mga DIFFERENCES x tax rate PLUS the TAXABLE INCOME x tax rate.
*Laruin mo, pag-aralan mo yung FORMAT Ng FORMULA
Journal entry:
Income tax expense
Income tax payable
*so ito yung babayaran niya muna sa B
*dalawa na ang journal entry mo,(1) to
* Ang total ng 1, ALSO CALLED CURREN
*As a proof, since there are no permanent differences, t

accounting income of P10,000,000 multiplied by 30% or
*REMINDER HA: SO ANG TOTAL TAX EXPENSE AY COMPU

DIFFERENCES. In the scenario above kasi, walang PERMA
INCOME agad ang basis.
CONTINUATION…………….
Continuing the illustration, on December 31, 2021, the statement of financial position (balance sheet) accounts have the same
and tax purposes, except for the following:
*Ibig sabihin, tinuloy padin niya yung amortization niya ng Computer software as is, at yung depreciation niya at 5 %
yun ang accounitng policy niya. Hindi porke iba ang treatment ni BIR e susundin niya si BIR. For accounting purpose
internal control o policy na susundin althroughout the accounting years.
*Meron lang naidgdag na issue dito sa continuation, yung treatment naman ng Accured liability. So kanina, asset an
differences. Ngayon, merong Liability account naman na magiging cause ng difference habang may reversal sa com
at building.
12/31/2021 Carrying amount Tax base

Computer software cost 3,000,000 -
Building 45,000,000 40,000,000
Accrued liability-healthcare 2,000,000 -
In January 2021, Easy Company entered into an agreement with the employees to provide health care benefits. The cost of su
2021 is P2,000,000.
This amount was accrued as expense in 2021 for accounting purposes. However, health care benefits are deductible for tax pu
when actually paid.
ITULOY NATIN:
2021
(1) Computer software 3,000,000
Building 5,000,000
Total TAXABLE TEMPORARY DIFFERENCE (TTD) 8,000,000
*For 2021, ito yung icoconsider mong difference na TTD/DTL
DEFERRED TAX LIABILITY 2,400,000
Last 2020, dba may balance kang DEFERRED TAX LIABILITY

1,950,000 12/31/2020
450,000 Increase in DTL, adjustment

2,400,000 12/31/2021 *Ito na yung bagong balance
(2) Accrued liability-health care 2,000,000

Multiply by tax rate 30%
DEFERRED TAX ASSET 600,000
*If the tax base is lower than the carrying amount, the difference is a future deductible
amount and therefore, there is a deferredt tax asset.
*Zero ang tax base niya diba kasi nga hindi kinonsider ni BIR for 2021 ang 2,000,000
na deduction for tax purposes. Therefore, definitely ZERO is lower than the
DIFFERENCE of 2,000,000
*Kung hindi mo maintindihan ang ganitong explanation, basta sundin mo yung
sinasabi ko base sa formula. Importante alam mo pagdistinguish ng TTD/DTL
at DTD/DTA. Yan lang yung sinasabi na kaekekan.
Journal Entry for 2021

1. To record the INCREASE in Deferred Tax Liability

2. to recored the deferred tax asset

Income tax benefit 600,000
Since walang TAXABLE INCOME, DI NATIN MACOCOMPUTE ANG INCOME TAX EXPENSE NG BUO
SO LAGYAN NATIN ANG VALUE NG ACCOUTING INCOME FOR 2021
COMPUTATION OF TAXABLE INCOME FOR 2021
If the pretax accounting for 2021 is P15,000,000, the taxable income is computed as:
ACCOUNTING INCOME PER BOOK (pretax accounting income) 15,000,000

ACCOUNTING INCOME SUBJECT TO TAX 15,000,000
Computer software cost entirely expensed in 2021 1,000,000
Excess tax depreciation (2,500,000)

Accrued liability- health benefits 2,000,000

JOURNAL ENTRY TO RECORD THE CURRENT TAX EXPENSE FOR 2021
Income tax expense 4,650,000.00

Income tax payable 4,650,000.00

Income before tax 15,000,000 *Income before tax and after deductin
Income tax expense
Deferred tax expense 450,000
Income tax benefit (600,000) 4,500,000
NET INCOME after tax 10,500,000 *NET INCOME after deducting TAX EFF
As a proof, the total income tax expense is equal to P15,000,000 multiplied by 30% or P4,500,000
NET DEFERRED TAX

Deferred tax expense 450,000 DTL for 2021
Income tax benefit (600,000) DTA for 2021
Net deferred tax benefit (150,000) * for 2021 (mas malaki kasi ang DTA, diba nga tax benefi
AITI - will result to DTL
TIAI - will result ot DTA
* Ang sinasabi nya, EQUAL NA SANA ANG ACCOUNTING INCOME SA TAXABLE INCOME
Pero dahil sa ITEM na ito, magkakaroon ng difference ang AI at TI
Difference *Observe mo, definitely ang Carrying amount is not the TAX BASE.
4,000,000 *Given na ang TAX BASE dito
2,500,000 *Ang tax base is the AMOUNT that is considered for TAX PURPOSES
*The CARRYING AMOUNT diba is NET OF DEPRECIATION or AMORTIZATION
*The Difference naman is EITHER DTL or DTA
*Look at the Computer software Carrying amount in the table

ibig sabihin, kakabili lang pala niya at 5,000,000. Meaning, ang amortization
niya ay P1,000,000 (5,000,000 cost LESS 4,000 Carrying amount = 1,000,000
amortization for 2020)
*i-test natin kung 5 years na life niya ay tugma sa 1,000,000 amortization niya
(5,000,000 cost/1,000,000 amortization = 5 years! Tama diba)
*PERO itong useful life na ito ay ACCOUNTING PURPOSES. Paano pag
iba ang depreciation for TAX PURPOSES. E di ITO na ang isa sa hinahanap
nating difference! IBIG sabihin NITO "AITI" or ACCOUNTING INCOME IS
HIGHER THAN TAXABLE INCOME. THEREFORE DTL ang difference na ito.
*Yun naman pala e!, IT was expense outright for tax purposes during the year!
What does this mean! Samantalang 1,000,000 lang ang inexpense ni
Accounting! Kaya lumalabas yung 4,000,000 difference
*Kung kakabili lang ang building yung 47,500,000 Carrying amount pala
ay nabawasan ng 1 year depreciation for 2020 AMOUNTING 2,500,000
EXACTLY THE SAME AS THE DIFFERENCE. So ibib sabihin 5%
ang Accouting depreciation at 10% ang tax depreciation, so malamang
mas malaki ang ibinawas na expense sa Tax purposes kesa sa Accounting
purposes. Therefore AITI uli or Accounting Income is higher than
Taxable income resulting to DTL
DIFFERENCE
50,000,000
Depreciation (5,000,000 X 10%) 5,000,000 -2,500,000
NG AMOUNT (Tax base) 45,000,000 2,500,000
TIN YUNG FORMULA
DTL
*Ibig sabihin ng PRETAX ACCOUNTING INCOME, is the ACCOUNTING INCOME BEFORE DEDUCTING THE INCOME TAX
*IBIG SABIHIN, LAHAT AY PAREHAS BETWEEN ACCOUNTING INCOME

AND TAXABLE INCOME EXEPT FOR THE TEMPORARY DIFFERENCES
IN RECOGNIZING AMORTIZATION AND DEPRECIATION OF THE SAID ASSETS!
12/31/2020 *Hindi pa ito yung taxable income ha dahil wala namang given.
*DTL lang ito ha, hindi din natin macompute ang TOTAL
Income tax expense at CURRENT TAX EXPENSE dahil
wala namang given. Sa ibaba merong assumed amount
for pretax accounting income. Doon natin kukumpletuhin
ang detalye sa formula na ito.
(10,0000,0000 X 30% TAX RATE = 3,000,000 TOTAL INCOME TAX EXPENSE
*Since binabawas ang differences, therefore TTD/DTL sya

(5,000,000 - 1,000,000), diba nga per accounting kinonsider lang yung portion ng amortization, e si BIR, sabi niya NO! deductib
(5,000,000-2,500,000),SABI NI BIR, kulang ang depreciation rate mo, dapat base sa 10%, so kailangan magbawas ka pa! kaya m
*Wala namang DTD so you will arrive at the taxable income na
*So ito na ang CURRENT INCOME TAX
00,000) IS ACTUALLY THE TOTAL INCOME TAX EXPENSE

OME x Tax rate, ang break down nito ay
1,050,000
e tax payable 1,050,000
yung babayaran niya muna sa BIR while yung 1,950,000 ay deferred muna at marereverse in the future period
a na ang journal entry mo,(1) to record the deferred liability, (2), to record the income tax payable
otal ng 1, ALSO CALLED CURRENT TAX EXPENSE and 2 ALSO CALLED THE DEFERRED TAX EXPENSE, uulitin ko is the total income tax expens
INCOME STATEMENT PRESENTATION

(sa accounting ito ha, wala tayong pakialam sa kung paano naglilibro si BIR)
*Ito yung nasa ilalim ng INCOME STATEMENT ha,
Income before tax (Accounting Income) 10,000,000

Income tax expense
Deferred tax expense 1,950,000 3,000,000
Net income (after tax) 7,000,000
are no permanent differences, the total icome tax expense is equal to the
0,000,000 multiplied by 30% or P3,000,000
TOTAL TAX EXPENSE AY COMPUTED AFTER ADDING/DEDUCTING THE PERMANENT

nario above kasi, walang PERMANENT DIFFERENCES kay automatic, yung ACCOUNTING
e sheet) accounts have the same basis for accounting
at yung depreciation niya at 5 %. Siyempre

a si BIR. For accounting purposes, meron kang
ured liability. So kanina, asset ang focus ng

ce habang may reversal sa computer software
Difference
3,000,000
5,000,000
2,000,000
lth care benefits. The cost of such plan for *Ganito yan, yung health care benefits na yan actually provid
sa kanyang employees. In case namagkasakit ang employees
na pampahospital. Pero kasi, hindi hindi niya binayaran in cas
enefits are deductible for tax purposes only pero nagcredit sya ng Accrued liability. So kapag inexpense n
ibinawas niya sa Income niya, kaya bumaba ang accounting i
* pero sabi ni BIR, bat mo ibinawas, hindi mo pa naman binay
si BIR CASH BASIS. Sabi ni BIR, ibabawas mo as expense kapa
*Therefore, IDADAGDAG MO ito sa accounting income mo to
So ang tawag dito pag IDADAGDAG ay DEDUCTIBLE TEMPOR
GETS MO NA BA ANG TTD (DTL) AND DTD (DTA)
COMPUTER SOFTWARE
COST
AMORTIZATION 12/31/2020
Carrying cost, 12/31/2020
AMORTIZATION 12/31/2021
BUILDING
COST
DEPRECIATION 12/31/2020
DEPRECIATION 12/31/2021
* Itong expense na ito, in-OUTRIGHT ni accouting

pero si BIR sabi niya, wag mo munang ibawas
as expense. Ibawas mo pag nabayaran mo na
*Kaya DTD or will result to DEFERRED TAX ASSET Increase in DTL
COMPUTER SOFTWARE
BUILDING
Total
multiply by tax rate
Increase in DTL
*so walang permanent difference
*kaya ito din ang bases ng income tax expense
*Reversal lang ito UNTIL FULLY amortize, Balikan mo uli sa simula hanggang makuha mo ang logic, pero nasa TTD ka parin ha k
*Idagdag mo daw kasi dapat hindi mo ibinawas
*so ito yung babayaran mo sa BIR
*Ito yung entry sa babayaran sa BIR

me before tax and after deducting PERMANENT DIFFERENCEs
Accounting income(after deducting permanet differences) x tax rate

Increase in DTL in 2021 (TTD x tax rate)
Deferred tax asset in 2021 (DTD x tax rate)
NCOME after deducting TAX EFFECT of taxable income and TTD/DTD
asi ang DTA, diba nga tax benefit pag DTA)

ME SA TAXABLE INCOME
MORTIZATION
g amortization
nt = 1,000,000
mortization niya
during the year!
Accounting
TING THE INCOME TAX
, e si BIR, sabi niya NO! deductible lahat, so magbawas ka pa ng 4,000,000
ilangan magbawas ka pa! kaya may additional na deduction of 2,500,000 to arrive at a TAXABLE INCOME
Accounting income
Multiply by tax rate
Total Income tax expense
Comuter software cost entirely expensed in 2020 4,000,000
Excess tax depreciation 2,500,000
Total
multiply by tax rate
Deffered tax liability
Taxable income
Multiply by tax rate
Current tax expense
ko is the total income tax expense
e benefits na yan actually provided by the company
se namagkasakit ang employees, merong gagamitin
hindi hindi niya binayaran in cash kaya inexpense niya
ed liability. So kapag inexpense niya, ibig sabihin,
a, kaya bumaba ang accounting income niya.
nawas, hindi mo pa naman binayaran. Kasi nga diba
R, ibabawas mo as expense kapag nabayaran mo na ng cash
O ito sa accounting income mo to arrive at TAXABLE INCOME.
AGDAG ay DEDUCTIBLE TEMPORARY DIFFERENCE OR DTA
TL) AND DTD (DTA)
Accounting Tax Difference

(5 YEARS AMORTIZATION) (OUTRIGHT)
5,000,000 5,000,000 -
(1,000,000) (5,000,000) 4,000,000 *ITO YUNG DIFFERNECE NUNG 2020
4,000,000 - 4,000,000
(1,000,000) - (1,000,000) * In computing taxable income, add this b
3,000,000 - 3,000,000 *ITO NAMAN ANG DIFFERENCE THIS 2021
*NAPANSIN MAY REVERSAL NA 1MILLION
*Ang reversal is hanggang fully amortized
Accounting Tax Difference
(5%, depreciation) (10% depreciation)
50,000,000 50,000,000 -
(2,500,000) (5,000,000) 2,500,000 ito yung difference nung 2020
47,500,000 45,000,000 2,500,000 .
(2,500,000) (5,000,000) 2,500,000 * You have to deduct this again kasi nga 5
45,000,000 40,000,000 5,000,000
1,000,000
(2,500,000)
(1,500,000)
30%
(450,000)
ogic, pero nasa TTD ka parin ha kasi nga TTD ang pinanggalingan niya nung una
10,000,000
30%
3,000,000
6,500,000
30%
1,950,000
PLUS
3,500,000
30%
1,050,000
ERNECE NUNG 2020
axable income, add this back, kasi wala ka na dapat ibabawas dahil nga naibawas mo na ng buo last year when you were computing taxab
NG DIFFERENCE THIS 2021
Y REVERSAL NA 1MILLION FOR COMPUTER SOFTWARE
hanggang fully amortized nna
nce nung 2020
educt this again kasi nga 5% lang lagi ang binabawas mo sa accounting income to arrive at a taxable income
en you were computing taxable income. Basically nagrereverse ka na lang dito
ILLUSTRATION 5- COMPREHENSIVE (IA2 2020 PAGE 543)
Pati pala revaluation may issue din si BIR. So pakikialaman natin
On January 1, 2015, Simple Company acquired an equipment for P6,000,000
The equipment is depreciated using a straight line method based on a 15-year life
with NO RESIDUAL VALUE
On January 1, 2020, after 5 years, the equipment was revalued at a replacement cost
of P6,750,000
The income tax rate is 30%
Original
Cost
Equipment 6,000,000
Accumulated depreciation
(6,000,000/15 x 5) 2,000,000
(6,750,000/15 x 5)
Carrying amount/sound value/revaluation surplus 4,000,000
Carrying Amount
ITO ANG SABI REGARDING REVALUATION SURPLUS
The REVALUATION SURPLUS, is a FUTURE TAXABLE AMOUNT AND THEREFORE, THERE IS A DEFERRED TAX LIABILITY
*IBIG SABIHIN NG FUTURE TAXABLE AMOUNT, HINDI MUNA ICOCONSIDER NI BIR ANG EFFECT
NG INCREASE NG DEPRECIATION AS EXPENSE, PERO SI ACCOUNTING KAILANGAN NIYANG ICONSIDER
*THEREFORE MAS MALAKI ANG ACCOUNTING INCOME KESA SA TAXABLE INCOME RESULTING TO TTD
*THEREFORE ITO AY TTD RESULTING TO DTL
JOURNAL ENTRY NATIN SA REVALUATION:
1. To record the REVALUATION
1/1/2020 Equipment 750,000.0

Accum depreciaiton 250,000.0
Revaluation surplus 500,000.0
2. To recognize the DEFERRED TAX LIABILITY ON THE REVALUATION SURPLUS
1/1/2020 Revaluation surplus 150,000.00

Deferred tax liability 150,000.00
Note that the deferred tax liability is charged to equity, meaning, revaluation surplus
3. To record the annual depreciation subsequent to revaluation (remaining life of equipment is 10 years)
*Siyempre gamitin mo na ang bagong carrying amount dahil sa epekto ng revaluation
12/31/2020 Depreciation (4,500,000/10) 450,000

Accum. Depreciation) 450,000
*the depreciaiton is based on the Soiund value( replacement cost)(ipinalit na cost) for accounting purposes
4. To record the annual realization of the revaluation surplus:

*Di ba nga habang dinedepreciate natin ang revalued asset, inaamortize din natin ang kakambal niyang Revaluati
12/31/2020 Revaluation surplus 35,000

Retained earnings 35,000
Revaluation surplus 500,000

Less: Deferred tax liability -150,000 *di ba nga nagreverse tayo dahil sa DTL, so
Net revaluation surplus 350,000
Annual realization (350,000/10) 35,000
* The revaluation surplus is a component of the OCI and subsequently reclassified through
equity or retained earnings
COMPUTATION OF TAXABLE INCOME
IF THE INCOME BEFORE DEPRECIATION AND BEFORE TAX IS P3,000,000*(kunwari lang na hindi pa naibabawas ang depreciati
*Meaning, UNADJUSTED ACCOUNGTING INCOME PALANG ITO, IBABAWAS MO PA ANG DEPRECIATION
*siNCE PAREHAS ANG TREATMENT NI ACCOUNTING AT TAX, EXCEPT FOR THE EFFECT OF REVALUATION,
E DI IBAWAS MO NA LAN GANG DEPRECIATION BASE ON COST TO GET THE TAXABLE INCOME.
GETS MO?
*Tingnan mo yung date, diba
THE TAXABLE INCOME IS COMPUTED AS FOLLOWS: (hindi accounting iNcome ha
Income before depreciation and tax 3,000,000

Tax depreciation BASED ON COST(4,000,000/10) (400,000)
TAXABLE INCOME same 2,600,000
CURRENT TAX EXPENSE 780,000
JOURNAL ENTRY TO RECORD THE CURRENT TAX EXPENSE

Income tax payable
THE ACCOUNTING INCOME COMUTED AS FOLLOWS:
Accounting Income before depreciation and tax 3,000,000.00

Accounting depreciation BASED ON revalued amount (4,500,000/10) (450,000.00)
Accounting income after depreciation 2,550,000.00
TOTAL INCOME TAX EXPENSE 765,000.00
(780,000 -765,000=15,000)
Replacement Appreciation
Cost
6,750,000 750,000
2,250,000 250,000
4,500,000 500,000
Sound Value Revaluation surplus
IS A DEFERRED TAX LIABILITY

R NI BIR ANG EFFECT
ANGAN NIYANG ICONSIDER
INCOME RESULTING TO TTD
*Alam mo naman na ang magjournal entry ng revaluation diba

*Increase mo lang ang asset with a corresponding increase in Accum. Depreciation
and the credit Revaluation surplus as a component of the Retained earnings (OCI yata ito, pakirecall ang topic sa revaluation s
*So charge mo pala ang corresponding effect ng DTL sa Revaluation surplus

pment is 10 years)
revaluation
na cost) for accounting purposes
din natin ang kakambal niyang Revaluation surplus
a nga nagreverse tayo dahil sa DTL, so ibawas muna natin bago natin iamortize
lassified through
na hindi pa naibabawas ang depreciation for 2020 at yung effect ng revaluation surplus
S MO PA ANG DEPRECIATION
THE EFFECT OF REVALUATION,
E TAXABLE INCOME.
COMPUTATION OF DEFERRED TAX LIABILITY
*the assumtion here is without Equipment

the revaluation Accum depreciation
Jan 1 2015- jan 1 2020
*Ito yung talagang babayaran mo Jan 1 2020 - dec 31, 2020
*(6,750,000-2,250,000/10)
**(6,000,000-2,000,000/10)
Carrying amount
780,000
On December 31, 2020, taxable temporary differences as a result of
Deferred tax liability - 12/31/2020 (30%x450

Deferred tax liability - January 1, 2020
DECREASE IN DEFERRED TAX LIABILITY
Diba may initial entry ka na last January 1, 2020

So yung adjustment/decrease na lang ang irecord mo
JOURNAL ENTRY TO RECORD THE DECREASE IN DEFERRED TAX LIAB
Deferred Tax liability

Income tax expense
,000 -765,000=15,000) Wag kang maguluhan, tandaan mo to. IISA lang nanam ang SPECIAL
ANG REVALUATION SURPLUS. TANDAAN MO LANG NA SA REVALUAT
BIR KAYA MADALI LANG. AUTOMATIC TEMPORARY DIFFERENCE SYA
PROBLEM NA PAKIKIALAMAN NI BIR/TAX ANG REVALUATION KAYA M
INCOME STATEMENT PRESENTATION
INCOME BEFORE DEPRECIATION AND TAX

DEPRECIATION ON REVALUED AMOUNT
INCOME BEFORE TAX (accounting income)
INCOME TAX EXPENSE
CURRENT TAX EXPENSE
DECREASE IN DEFERRED TAX LIABILITY
NET INCOME AFTER TAX
REVALUATION SURPLUS REALIZATION
TOTAL EFFECT ON RETAINED EARNINGS
*The total income tax expense is equal to the accounting income of

o, pakirecall ang topic sa revaluation surplus)
D TAX LIABILITY
at replacement cost at original cost
Carrying amount Tax base Difference *NOTE, WALANG PAKIALAM SI BIR SA REVALUATI
6,750,000 6,000,000 750,000 DAHIL CASH BASIS NGA SYA
*WALA NGA NAMANG CASH TRANSACTION SA REV
(2,250,000) (2,000,000) (250,000)
(450,000)*
000,000/10) (400,000)** (50,000)
4,050,000 3,600,000 450,000 *TAXABLE TEMPORARY DIFFERENCE
*Supposedly ito yung tax base for DEFERRED TAX L
Kaso merong adjustment due to the effect of the
Revaluation surplus diba
le temporary differences as a result of the revaluation is computed above
red tax liability - 12/31/2020 (30%x450,000) 135,000

red tax liability - January 1, 2020 -150,000 * So dalawa ang effect ng DTL mo ha, nung January 1 sa Revaluati
EASE IN DEFERRED TAX LIABILITY -15,000
st January 1, 2020
na lang ang irecord mo
THE DECREASE IN DEFERRED TAX LIABILITY
15,000.00
me tax expense 15,000.00
n mo to. IISA lang nanam ang SPECIAL TOPIC SA ACCOUNTING FOR INCOME TAX
TANDAAN MO LANG NA SA REVALUATION SURPLUS, WALANG PAKIALAM SI
OMATIC TEMPORARY DIFFERENCE SYA AT DTL. UNLESS SASABIHIN NI
NI BIR/TAX ANG REVALUATION KAYA MAGINGAT KA SA ANALYSIS MO SA PROBLEM
ito din yun kung gusto mong mas maliw
ON AND TAX 3,000,000

(450,000)
ting income) 2,550,000
780,000 2600000
FERRED TAX LIABILITY (15,000) 765,000
1,785,000
35,000
1,820,000
e is equal to the accounting income of P2,550,000 multiplied by 30% or P765,000

AKIALAM SI BIR SA REVALUATION NI ACCOUNTING
NG CASH TRANSACTION SA REVALUATION

ARY DIFFERENCE
g tax base for DEFERRED TAX LIABILITY
ment due to the effect of the
ha, nung January 1 sa Revaluation surplus, and on December 31 para magadjust ng DTL balance to be reported in FS
ACCOUNTING INCOME PER BOOK (pretax accounting income)

NONDEDUCTIBLE EXPENSE
NONTAXABLE REVENUE
ACCOUNTING INCOME SUBJECT TO TAX
TAXABLE TEMPORARY DIFFERENCES
n kung gusto mong mas maliwanag (REVALUED DEPRECIATION 450,000 PER ACCOUNTING, LESS
DEPRECIATION PER TAX PURPOSES OF 400,000)
DEDUCTIBLE TEMPORARY DIFFENCES(DTD OR DTA)
TAXABLE INCOME
Mulitply by tax rate
CURRENT TAX EXPENSE
2,550,000
-
-
2,550,000
50,000 *Idagdag Mo kasi daw dapat 400,000 lang ang ibabawas mo, hindi 450,000 na revalued amount
2,600,000
30%
780,000
0 na revalued amount

Accounting For Income Tax

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Accounting For Income Tax

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ACCOUNTING FOR INCOME TAX

*Natutunan mo gumawa at intindihin ang basic financial statements

*Natutunan mo kung paano gumawa ng INCOME STATEMENT at magcompute

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

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

INCOME STATEMENT PER BOOK Income STATEMENT PER TAX RETURN

Ang mga differences na ito w

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

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

*Taxable income may be defined also as the EXCES

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

DIFFERENCES BETWEEN ACCOUNTING INCOME AND TAXABLE INCOME

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

1. Permanent differences (This is ELIMINATED IN ACCOUNTING INCOME TO ARRIVED AT ACCOUNTING INCOME SU

PERMANENT DIFFERENCES TEMPORARY DIFFENCES

KINDS OF TEMPORARY DIFFERENCES

TAX BASE OF AN ASSET TAX BASE OF A LIABILITY

*FUTURE DEDUCTIBLE sya DAHIL? Dahil wala pan

Ang mga differences na ito will result sa tinatawag na

he INCOME APPEARING on the INCOME

y be defined also as the EXCESS

RRED TAX LIABILITY

D AT ACCOUNTING INCOME SUBJECT TO TAX.. Tandaan mo ito)

mo ang pagkakaiba SA TABLE?

MPORARY DIFFERENCES FOR THE YEAR 2020

Journal entry 2020

Journal entry 2021

when tax is paid:

gnzied an estimated warranty liability Income tax payable 24

ZERO because the ESTIMATED WARRANTY

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

ULTIPLY ANG TAX RATE!!!!

ACCOUNTING BIR ACCOUNTING BIR

Journal entry 2020

Journal entry 2021

when tax is paid:

Income tax payable 30

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

NET INCOME 0 100

able dito dahil

suming yung nasa taas

DEFERRED TAX LIABILITY

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

Actually , a deferred tax liability arises from the following:

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

ACCOUTING INCOME HIGHER THAN THE TAXABLE INCOME

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

b. Development cost may be capitalized and amortized over future

OTHER TAXABLE TEMPORARY DIFFERENCES

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

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

RECOGNITION OF A DEFERRED TAX LIABILITY

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

a. Goodwill resulting from a business combination and which is

b. INITIAL RECOGNITION OF ASSET OR LIABILITY in a transaction

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

DEFERRED TAX ASSET

Actually , a deferred tax asset arises from the following:

TAXABLE INCOME HIGHER THAN ACCOUNTING INCOME

FUTURE DEDUCTIBLE TEMPORATY DIFFERENCES INCLUDE THE FOLLOWING:

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

OTHER DEDUCTIBLE TEMPORARY DIFFERENCE