Notes- ch3 and 3A
Accrual accounting is a method of accounting measures the performance of a company by
recognizing economic transaction when considering cash transaction.
Deferred means delay that will paid to a later time. Deferred revenue is on the company’s
balance sheet as a liability. Example: A cleaning company accept the prepaid from the
costumer for its service. But if cleaner cannot provide the service at that time, this unearned
fee should be deferred revenue until the service be done. Deferred expense could be the
cost had already incurred, but not yet receive goods or services. Example: A company paid
its rent for the rest of the month which means prepaid rent in their asset account.
Accruals could be the revenue or expenses that are not yet recorded in the accounts. For
example of accrual revenue, the electric utility company would only bill the customers after
the data they use at the end of the month, so they need to adjust entry after they receive
