DTL adjustement in P &L

DTL adjustement in P &L

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I am trying to finalise one of the company accounts. The figures are as follows.

The company is in first year of trading.

Profit/(Loss) before taxation    (18,000)

Capital allowance                     6,000 (depreciation 2,000)

I  have passed the  deferred tax liability(DTL) journal as 6000-2000*20%

Tax p&l    800

DTL        800

deferred tax asset journal has not been passed since the directors are not sure of future profits.

my doubt is should i add the amount of DTL 800/-to the  P & l OR deduct it from P & l loss?

Since  it is DR i taught of adding to the Loss of 18000/- and carry 18800/- to financial position. and reflect the DTL 800 in fianacial position as long term  liabilities.

Your advice is appreciated

Thanks everyone. 

Replies (5)

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By johngroganjga
26th Aug 2014 21:03

The £800 you have calculated is a liability, if you provide for it. You mention a deferred tax asset that has not been provided for. You do not say what it arises from, but I am guessing that it is unrelieved losses carried forward. Is that right?

On the figures you set out I would provide for no deferred tax at all. In other words account for the tax benefit of the unrelieved losses insofar as it eliminates the deferred tax liability on the accelerated capital allowances, but no more.

I hope this answers your question.

Thanks (2)
Replying to PChapman:
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By Student4141
27th Aug 2014 07:58

So it will be better not to provide for DTL. since I am not providing for DTA. So if I pass for DTL I should add to to the loss in the financial statement? Thanks.

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By Student4141
27th Aug 2014 07:58

So it will be better not to provide for DTL. since I am not providing for DTA. So if I pass for DTL I should add to to the loss in the financial statement? Thanks.

Thanks (0)
By johngroganjga
27th Aug 2014 08:28

Not sure what you mean by "pass for DTL"?  If you mean "provide for the £800 deferred tax liability" yes that would increase the loss, as it would be a debit to the profit and loss account.  As I said, the £800 is a liability, which is  a credit balance in the balance sheet.

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Euan's picture
By Euan MacLennan
27th Aug 2014 10:39

Terminology

OP's "passed" = "posted" to the rest of us?

John is, of course, right.

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