A valuation account is used to: reduce a deferred tax asset. increase a deferred tax liability. reduce a deferred tax liability. increase a deferred tax asset.
The use of a valuation account is most particularly in a bid to reduce a deferred taxasset.
What is a valuation account?
A valuation account by definition is usually a balance sheet account used in combination with another balance sheet account in order to report the carrying amount of an asset or liability as the case may be.
On this note, valuation allowance is the mechanism used to reduce the deferred taxasset to the appropriate amount.
