If a company depreciates a five-year asset using the straight-line method for books and double declining balance for tax, it will create a _____________ if it regularly replaces the assets after two years.     a)  Current tax payable   b)  Current tax liability   c)  Deferred tax asset   d)  Deferred tax liability

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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.