Buffalo Wings Company reports taxable income of P1,658,000 on its income tax return for the year ended December 31, 2020. Temporary differences between financial income and taxable income for the year are: • Book depreciation in excess of tax depreciation, P160,000 • Accrual of product warranty claims in excess of actual claims, P250,000 • Reported installment sales revenue, P530,000 What is Buffalo Wings Company’s financial income subject to tax for the year ended December 31, 2020?

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Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.