Agricultural producers are allowed to use the cash method of accounting for calculating income for federal and state tax purposes. This causes inevitable and numerous differences between taxable farm income and accrual farm income.

For the most part, farm financial statements are not prepared in a way that recognizes the impact these differences have on tax liability, earnings, and net worth.

Recognizing the amount of the estimated deferred tax liability and its' possible impact on your operation are part of the analysis of every year's business.

Continue reading at: Deferred Tax Monster.