Tollowing assets Carrying amount Tax base Property Plant and equipment 10,000,000 7,000,000 5,000,000 4,000,000 Inventory 2,500,000 4,000,000 Accounts receivable 2,400,000 3,000,000 Liabilities 6,000,000 5,500,000

Definition Definition Estimated future tax made while preparing accounts. Deferred tax is estimated based on past and present transactions from financial statements. It is not the actual tax that needs to be paid or is refundable from the revenue authority; it is an accounting entry. It is necessary to account for deferred tax due to difference between accounting profits and taxable profits.