What Is The Difference Between Accruals And Deferrals?

Accrual—accrual-basis recognition precedes (leads to) cash receipt/expenditure

Revenue—recognition of revenue earned, but not received

Expense—recognition of expense incurred, bill not paid

Deferral—cash receipt/expenditure precedes (leads to) accrual-basis recognition

Revenue—postponement of recognition of revenue; cash is received; but revenue is not earned

Expense—postponement of recognition of expense; cash is paid; but expense is not incurred

A deferral postpones recognition of revenue or expense by placing the amount in liability or asset accounts. Two methods are possible for deferring revenues and expenses depending on whether real or nominal accounts are originally used to record the cash transaction.