Question

Which of the following is an example of an adjusting journal entry for a deferral?

A :

Recording revenues that have been earned on account.

B :

Expensing a part of the cost of a building.

C :

Expensing wages and salaries that will not be paid until the next period.

D :

Recording an expense in the same period in which it was paid

Answer 1

• The correct answer is Option ‘B’ Expensing a part of the cost of a building is an example of an adjusting journal entry for a deferral. Expensing a part of the cost of an asset is generally termed as ‘depreciation’. The cost of the asset is not expensed fully in the year in which it is acquired. Rather, it gets depreciated over its useful life and the cost gets expensed every year. Hence, the cost gets ‘deferred’ to be expensed over future period.
• Option ‘A’ is an ‘accrual’ adjustment nature.
• Option ‘C’ is also an ‘accrual’ adjustments
• Option ‘D’ is not even an adjusting entry, rather a normal journal entry recording.