Question

What is an account( not paid but incurred), What is a deferral ( paid but not incurred)? Affect of accrual and deferral on the Cash Flow statement, if any.

Answer 1

1.Account "not paid but incurred" means the outstanding Expenses.

2.Deferral "paid but not incurred" is also an outstanding amount.

The affect of accurual and deferral is that,

In 1st the whole amount is shown as expense entirely in the current year balance sheet...like salaries etc.

In 2nd, he whole amount is NOT shown as expense entirely in the current year balance sheet, but a small portion of it get written off in coming next years...like preliminary expense which should be written off as expense it next say 10 years equally.

In both the cases cash will be paid in its entirely but there might be difference in year of payment.

I have explained everything step by step.

Go through it once and everything will be cleared.

Hope you understand the concept

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