Operating income and tax rates for C.J. Company’s first three years of operations were as follows:   Income Enacted tax rate 2017 $400,000 35% 2018 ($1,000,000) 30% 2019 $1,680,000 40% Assuming that C.J. Company opts only to carryforward its 2018 NOL, what is the amount of deferred tax asset or liability that C.J. Company would report on its December 31, 2018 balance sheet?

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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.