What do you understand by Deferred Tax Asset and Deferred Tax Liability?

Deferred tax assets reduce a company's future taxable income by reducing its current taxable income. The asset can be found when a business overpays its taxes. Eventually, this money will be returned to the business as tax relief.

On the other hand, deferred tax liability records taxes owing but not due until a future date on a company's balance sheet. The liability is deferred due to the difference in timing between when the tax was accrued and when it is due.