What are Accrual and Deferrals

Question

Accepted Answer

Accruals and deferrals are accounting concepts used to record revenue and expenses in the correct accounting period.

Accruals are revenues earned or expenses incurred but not yet recorded in the accounting books.
Deferrals are revenues received or expenses paid in advance but not yet earned or incurred.
Accruals and deferrals are necessary to ensure that financial statements accurately reflect the financial position of a company.
Examples of accruals include interest income earned but not yet received, and salaries earned but not yet paid.
Examples of deferrals include prepaid rent and unearned revenue.
Accruals and deferrals are adjusted at the end of each accounting period to ensure that financial statements are accurate.
Accruals and deferrals are important for accurate financial reporting and tax compliance.

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