For example, when a business sells something on predetermined credit terms, the funds from the sale is considered accrued revenue. An accrued expense is a liability that represents an expense that has been recognized but not yet paid. Created by. Items like rent, deferred taxes, payroll, and pension obligations can also be listed under long-term liabilities. Accrual: Accrue if the expense has been incurred but the cash has not yet been paid. Prepaid insurance, prepaid supplies and unearned revenue are examples of deferrals. Depreciation expense, is what gets charged to the income statement during a given accounting period. First, letâs clear up the terminology. PLAY. Accrued expenses are a liability of the business. STUDY. Youâre using the word âdepreciationâ very loosely, so Iâm unclear what youâre actually referring to. anton_berman. Gravity. Oftentimes an expense is not recognized at the same time it is paid. Write. Deferred expenses are an asset of the business. Accrual accounting gives the option of earning revenue you can add to financial statements, but there is no proof of payment during the accounting period. Flashcards. Learn. Deferred tax expense is the sum of any increase in deferred tax liability over a period minus an increase in deferred tax asset over the period. Accrual in related to prepone or an expense or revenue which leads to cash receipt or expenditure. I might pay for a licence for next year, so i would record it as a prepayment (deferred expense). Deferral leads to postponing an expense or revenue, which leads to placing that amount in liability or an asset account. Deferral expenses are already paid but not yet incurred. Accrued and Deferred Expenses/Revenues. Rent not yet collected already earned. Test. Spell. Accrued expenses are expenses that have been consumed by a business but havenât been paid for yet. Definition of Deferred Expense. A deferred expense is an asset that represents a prepayment of future expenses that have not yet been incurred. Total tax expense. Match. Deferred tax expense may be negative which results in total tax expense being less than current income tax obligation. Accrued Expense. Deferred expenses would essentially be prepayments. Deferred incomes are incomes that the business has already received compensation for but have not yet delivered the related product to the customers. It would then be taken out as the expense occurs (as the licence is used). Terms in this set (10) Deferred Revenue. A revenue not yet earned collected in advance. A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods.To accomplish this, the deferred expense is reported on the balance sheet as an asset or a contra liability until it is moved from the balance sheet to the income statement as an expense. Deferral: Defer if the cash has been paid but the expense has not yet been incurred. Deferrals or âprepaymentsâ are transactions in which the cash flow precedes the time when the expense or revenue is recognized. Accrued expenses are legitimate expenses i have not paid for yet. Accrued expenses vs. accounts payable. On the other hand, a deferral puts a higher priority on showing that you can make payments in the same accounting period for the expense you incurred. Accrued Revenue. What is a deferred expense? Accruals are transactions in which we recognize the expense or revenue before the money âchanges hands.â. The adjusting journal entry will be between an expense and a liability account. Future expenses that have been consumed by a business but havenât been paid that been... 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