Accrual vs Deferral

Difference Between Accrual vs Deferral

Certain accounting concepts are generally used in any company’s 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 more. These are adjusting entries, known as accrual and deferral accountingAccrual And Deferral AccountingAccrual is the process of recording revenue or expenses that have not yet been settled. Deferring means postponing the realization of revenue or expenditure until a later more, used by businesses often to adapt their books of accounts to reflect the accurate picture of the company.

Accrual and deferral are 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, more adjustment entries with a time lag in the reporting and realization of income and expense. Accrual occurs before payment or a receipt and deferral occurs after payment or 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 differences between accrual and deferral.

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Accrual vs. Deferral – Key Difference

The critical differences between accrual and deferral are as follows: –

Accrual vs. Deferral Head to Head Difference

Let us now look at the head-to-head differences between accrual and deferral.

Accrual occurs before a payment or receipt.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 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 more are already paid off but not yet incurred.  
Accrual is related to preponement of an expense or revenue, leading to cash receipt or expenditure.Deferral leads to postponing an expense or revenue, which puts 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 more. .
Accrual is incurring expenses and earning 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 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 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 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 a comparison table. You may also have a look at the following articles –

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