Accrued and Deferred Revenues and Expenses
deferred (unearned) revenue
a liability resulting from the receipt of cash before the good or service is provided
deferred (prepaid) expense
an asset created when a business makes advanced payments of future expenses
accrued revenue
Revenue has been earned but hasn't been collected
splitting between accounting periods
main part of accrual
Deferral
term meaning something being put off until later
Accrual
term meaning something has built up and accumulated
whether money has changed hands (accruals: money has not changed hands yet; deferrals: money has already changed hands)
what is the difference between accrual and deferral
accrued expense
when a company has incurred an expense but hasn't yet paid cash or recorded an obligation to pay
end of the accounting period
when are adjustments made?
in the period in which they are incurred
when are expenses recognized?
in the period in which it is earned
when are revenues recognized?
