Question

properly describes a deferral? a. Cash is received before the revenue is recognized b. cash is...

properly describes a deferral?

a. Cash is received before the revenue is recognized

b. cash is paid in the same time period that the expense is incurred

c. cash is paid after the expense is incurred

d. cash is received after revenue is recognized

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Answer #1

Ans - Cash is received before revenue is recognized (Option 'a')

Deferral refers to the situation when the event of recognition is in future however the cash has been accepted before. In that case it is not included as asset in balance sheet but as a liability and is treated as 'Unearned revenue' until the event of recognition happens.

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