Accrual vs Deferral

Difference Between Accrual vs Deferral

Certain accounting concepts are generally used in the revenue and expense recognition principleExpense Recognition PrincipleThe Expense Recognition Principle is an accounting principle that states that expenses should be recorded and compiled in the same period as revenues.read more for any company. These are adjusting entries, which are known as accrual and deferral accounting, that are used by businesses often to adapt their books of accounts to reflect the real picture of the company.

Accrual and Deferral are a part of those types of accountingTypes Of AccountingThere are different types of the accounting which an organization can follow as per the scope of its work and need of stakeholders. Some of them include financial accounting, forensic accounting, accounting information system, managerial accounting, taxation, auditing, cost accounting, etc.read more adjustment entries where there is a time lag in the reporting and realization of income and expense. Accrual occurs before payment, or a receipt and deferral occur after payment or a receipt. These are generally related to revenue and expenditure largely.

What is Accrual?

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What is Deferral?

Accrual vs. Deferral Infographics

Here we provide you with the top 6 difference between Accrual and Deferral

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Accrual vs. Deferral – Key Difference

The key difference between Accrual and Deferral are as follows –

Accrual vs. Deferral Head to Head Difference

Let’s now look at the head to head difference between Accrual and Deferral

AccrualDeferral
Accrual occurs before a payment or receipts.Deferral occurs after a payment or receipt.
Accrued expensesAccrued ExpensesAn accrued expense is the expenses which is incurred by the company over one accounting period but not paid in the same accounting period. In the books of accounts it is recorded in a way that the expense account is debited and the accrued expense account is credited.read moreAn accrued expense is the expenses which is incurred by the company over one accounting period but not paid in the same accounting period. In the books of accounts it is recorded in a way that the expense account is debited and the accrued expense account is credited.read moreAn accrued expense is the expenses which is incurred by the company over one accounting period but not paid in the same accounting period. In the books of accounts it is recorded in a way that the expense account is debited and the accrued expense account is credited.read more are already incurred but not yet paid.Deferral expensesDeferral ExpensesDeferred expenses refer to those obligations that the company has already paid in a particular accounting period; however, the benefits of these expenses have not been availed in the same accounting period. Such payments appear as an asset in the organization's balance sheet.read moreDeferred expenses refer to those obligations that the company has already paid in a particular accounting period; however, the benefits of these expenses have not been availed in the same accounting period. Such payments appear as an asset in the organization's balance sheet.read moreDeferred expenses refer to those obligations that the company has already paid in a particular accounting period; however, the benefits of these expenses have not been availed in the same accounting period. Such payments appear as an asset in the organization's balance sheet.read more are already paid but not yet incurred.
Accrual in related to prepone or an expense or revenue which leads to cash receipt or expenditureDeferral leads to postponing an expense or revenue, which leads to placing that amount in liability or an asset accountAsset AccountAsset Accounts are one of the categories in the General Ledger Accounts holding all the credit & debit details of a Company’s assets. The examples include Short-Term Investments, Prepaid Expenses, Supplies, Land, equipment, furniture & fixtures etc. read moreAsset Accounts are one of the categories in the General Ledger Accounts holding all the credit & debit details of a Company’s assets. The examples include Short-Term Investments, Prepaid Expenses, Supplies, Land, equipment, furniture & fixtures etc. read moreAsset Accounts are one of the categories in the General Ledger Accounts holding all the credit & debit details of a Company’s assets. The examples include Short-Term Investments, Prepaid Expenses, Supplies, Land, equipment, furniture & fixtures etc. read more.
Accrual is incurring the expenses and earning the revenue without paying or receiving cash.Deferral is paying or receiving cash in advance without incurring the expenses or earning the revenue.
The accrual method leads to an increase in revenue and a decrease in cost.The Deferral method leads to a decrease in revenue and an increase in cost.
The end objective of the accrual systemAccrual SystemAccrual Accounting is an accounting method that instantly records revenues & expenditures after a transaction occurs, irrespective of when the payment is received or made. read moreAccrual Accounting is an accounting method that instantly records revenues & expenditures after a transaction occurs, irrespective of when the payment is received or made. read moreAccrual Accounting is an accounting method that instantly records revenues & expenditures after a transaction occurs, irrespective of when the payment is received or made. read more is to recognize the revenue in the income statement before the money is received.The end objective is to decrease the debit account and to credit the revenue accountRevenue AccountRevenue accounts are those that report the business's income and thus have credit balances. Revenue from sales, revenue from rental income, revenue from interest income, are it's common examples.read moreRevenue accounts are those that report the business's income and thus have credit balances. Revenue from sales, revenue from rental income, revenue from interest income, are it's common examples.read moreRevenue accounts are those that report the business's income and thus have credit balances. Revenue from sales, revenue from rental income, revenue from interest income, are it's common examples.read more.

This has been a guide to the top difference between Accrual and Deferral. Here we also discuss the Accrual vs. Deferral along with infographics and comparison table. You may also have a look at the following articles –

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