Now if you're in business long enough you're eventually going to hear about a term called deferred taxes. There are two sides of deferred taxes. Taxes we'll have to pay in the future-a deferred tax liability or taxes we expect to get refunded in the future-a deferred tax asset. Now why would we ever have deferred taxes whether it's a deferred tax asset or a deferred tax liability? Well it has to do with the differences between our financial reporting standards or accounting standards and our tax reporting standards. The difference between these two standards between financial reporting and tax standards creates circumstances where we can't recognize something in our financial reporting on our income statement, but we have filed it in our taxes. What does that have to do with us? Well eventually you're going to have to come across those terms and just know if it's a deferred tax asset we expect to get refunded taxes in the future and if it's a deferred tax liability we expect to pay taxes in the future and we've got to have the cash to be able to do that. Now if this has been helpful and you want to continue developing your business acumen, check us out at Acumenlearning.com
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