The ABC Company has determined that its taxable income for the year 2021 is P3,000,000.   The following related facts were gathered (Income tax rate for current and future years is 30%):   Cumulative temporary differences, 12/31/2021 Taxable temporary differences- P1,480,000 Deductible temporary differences- P750,000   Permanent differences: Non-taxable revenue- P200,000 Non-deductible expenses- P600,000   Deferred tax asset, December 31, 2020- P150,000 Deferred tax liability, December 31, 2020- P300,000              How much is the total income tax expense (current and deferred) for the year 2021? A.P969,000 B.P900,000 C.P831,000 D.P813,000

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A:

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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.