Deferred tax assets and liabilities?
Can someone walk me through how deferred taxes affect the three financial statements? I'm assuming it goes as follows:
The company books its tax expense early, they are assuming it will be $100:
IS: Income tax expense of $100 CF: Increase income taxes payable by $100 (since no cash has been paid yet) BS: RE decrease by 100; Income taxes payable increases by $100
The company finds out their actual taxes owed is $80:
IS: N/A (assuming this because a deferral means you are deferring recognition) CF: Decrease deferred income taxes by $20 BS: Create a deferred tax asset of $20
I'm so confused by how taxes work and the series of events that occur when booking these things.
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