How to record DTA for long-term contract losses
Recognition of a deferred tax asset when a loss is recognized for book purposes on a long-term contract but is not yet deductible for tax purposes.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Deferred Tax Asset | Asset | 21,000.00 | - |
| Income Tax Provision | Expense | - | 21,000.00 |
💡 Accountant's Note
Under ASC 606, book losses on contracts are recognized immediately when they become probable. For tax purposes, these losses may be deferred until the contract is completed, creating a temporary difference.
Practitioner & Systems Framework
💻 ERP Architecture
Ensure the project accounting module tracks temporary differences at the contract level.
⚠️ Audit Flags
Significant differences between Percentage of Completion (PCM) for book and tax methods.
📄 Required Documentation
Contract loss study and comparison of GAAP vs. IRC Section 460 calculations.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
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