Practice question · Sort into groups
Accrual or deferral? Sort each adjusting entry.
Groups: Accrual · Deferral
- Recognise revenue from a subscription paid in advance
- Recognise one month of a prepaid annual lease
- Book revenue for work finished but not yet invoiced
- Record wages earned by employees but not yet paid
Hints
- One category records what happened but was not yet recorded.
- The other spreads what was recorded but has not yet happened.
Show the answer
Accrual: Record wages earned by employees but not yet paid, Book revenue for work finished but not yet invoiced
Deferral: Recognise one month of a prepaid annual lease, Recognise revenue from a subscription paid in advance
Why
Accrual = economic event happened, cash hasn't. Deferral = cash moved, economic event hasn't fully happened yet.
Practise Adjusting Entries
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