How to record DTA for onerous contracts
Accounting for a deferred tax asset related to a provision for loss-making contracts that is not yet tax-deductible.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Deferred Tax Asset | Asset | 12,000.00 | - |
| Deferred Tax Benefit | Income | - | 12,000.00 |
💡 Accountant's Note
Under GAAP, losses on onerous contracts are recognized immediately, but tax law typically denies deduction until the costs are actually incurred or paid.
Practitioner & Systems Framework
💻 ERP Architecture
Track the provision in a separate liability account and link it to the tax provision software as a temporary difference.
⚠️ Audit Flags
Large one-time provisions for contract terminations or unavoidable losses on the P&L.
📄 Required Documentation
Legal contract review, loss estimation calculations, and tax code reference for deduction timing.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
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.
Related Journal Entries
Discussion & Community Questions
Loading comments...