The asset-liability approach to accounting for income taxes requires a journal entry at the end of each year which either increases an asset or decreases a liability.

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The asset-liability approach to accounting for income taxes involves recognizing deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. This approach adjusts the values of deferred tax assets and liabilities each year based on changes in tax rates or tax laws, rather than simply increasing an asset or decreasing a liability.

The Asset-Liability Approach to Accounting for Income Taxes Requires a Journal