The difference between the value of a liability or an asset and the amount of tax that is due on that liability or asset is known as what?

The term that describes the difference between the value of a liability or asset and the amount of tax that is due on that liability or asset is known as deferred tax. This concept arises because tax laws and accounting principles can treat income and expenses differently, leading to temporary differences that affect taxable income.

For example, if a company recognizes income on its financial statements but has not yet received the cash that would trigger a tax liability, this creates a deferred tax asset. Conversely, if an expense is recognized for accounting purposes but the tax deduction is only applicable in future periods, it results in a deferred tax liability.

This distinction is significant in accounting as it helps in understanding the timing of tax payments and the future tax implications of current transactions. It allows companies to manage their tax obligations effectively by deferring taxes to a later period, impacting cash flow and tax planning strategies.

In this case, deferred revenue, accrued tax, and current tax pertain to different concepts. Deferred revenue refers to income received before it is earned, accrued tax deals with taxes that have been incurred but not yet paid, and current tax relates to taxes due for the current accounting period. These distinctions underscore why deferred tax specifically aligns with the definition provided in the question.