A deferred tax liability represents which of the following?

A deferred tax liability represents which of the following?

• A. A financial benefit
• B. A current tax payable
• C. A future tax obligation or payment due
• D. A tax credit

Answer: (C)

Deferred tax liability is a future tax obligation that arises from temporary differences between the accounting value of assets and liabilities and their tax bases. These timing differences will reverse over time, causing additional taxes to be payable in a future period. It represents taxes you expect to pay later, not current taxes due now. It’s not a current tax payable and not a tax credit; a related concept is a deferred tax asset, which reflects future tax deductions or savings.

Deferred tax liability is a future tax obligation that arises from temporary differences between the accounting value of assets and liabilities and their tax bases. These timing differences will reverse over time, causing additional taxes to be payable in a future period. It represents taxes you expect to pay later, not current taxes due now. It’s not a current tax payable and not a tax credit; a related concept is a deferred tax asset, which reflects future tax deductions or savings.