Compare and contrast accruals and deferrals. Compare and contrast accruals and deferrals. Compare and contrast accruals and deferrals. Solution Accruals and deferrals in the accounting cycle involve the time at which income and expense entries are noted in their respective accounts. Accruals and deferrals occur only when a business uses accrual-based accounting methods. If accruals and deferrals are not used correctly in the accounting cycle, certain accounts may seem undervalued or overvalued. An accrual occurs before a payment or receipt. A deferral occurs after a payment or receipt. There are accruals for expenses and for revenues. There are deferrals for expenses and for revenues. An accrual of an expense refers to the reporting of an expense and the related liability in the period in which they occur, and that period is prior to the period in which the payment is made. An example of an accrual for an expense is the telephone that is used in December, but the payment will not be made until January. An accrual of revenues refers to the reporting of revenues and the related receivables in the period in which they are earned, and that period is prior to the period of the cash receipt. An example of the accrual of revenues is the interest earned in December on an investment in a bond, but the interest will not be received until January. A deferral of an expense refers to a payment that was made in one period, but will be reported as an expense in a later period. An example is the payment in December for the six-month insurance premium that will be reported as an expense in the months of January through June..

1. Compare and contrast accruals and deferrals.
Compare and contrast accruals and deferrals.
Compare and contrast accruals and deferrals.
Solution
Accruals and deferrals in the accounting cycle involve the time at which income and expense
entries are noted in their respective accounts. Accruals and deferrals occur only when a business
uses accrual-based accounting methods. If accruals and deferrals are not used correctly in the
accounting cycle, certain accounts may seem undervalued or overvalued.
An accrual occurs before a payment or receipt. A deferral occurs after a payment or receipt.
There are accruals for expenses and for revenues. There are deferrals for expenses and for
revenues.
An accrual of an expense refers to the reporting of an expense and the related liability in the
period in which they occur, and that period is prior to the period in which the payment is made.
An example of an accrual for an expense is the telephone that is used in December, but the
payment will not be made until January.
An accrual of revenues refers to the reporting of revenues and the related receivables in the
period in which they are earned, and that period is prior to the period of the cash receipt. An
example of the accrual of revenues is the interest earned in December on an investment in a
bond, but the interest will not be received until January.
A deferral of an expense refers to a payment that was made in one period, but will be reported as
an expense in a later period. An example is the payment in December for the six-month
insurance premium that will be reported as an expense in the months of January through June.