Parker Ltd had the following opening balances for the current year beginning 1 July 2020: Deferred tax asset (DTA)       $24 000 Deferred tax liability (DTL)   $15 000 If the company tax rate decreased from 30% to 25%, the adjusting journal entry would include:   a. Dr DTL    3 000; Cr DTA    4 800   b. Cr DTL     4 000; Dr DTA     2 500   c. Cr DTA     4 000; Dr DTL    2 500   d. Cr DTL     4 800; Dr DTA    3 000   e. Cr DTA     1 200; Dr DTL    750

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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.