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Deferrals means those Expenses which are paid by business but the benefit against these still not received during the Current Accounting Period or an Income which is received by the business but still it is not earned due to non delivering of goods or non rendering of services. Examples of Deferred Expenses are Prepaid Expenses   or Prepayments  e.g., Prepaid Rent Or Prepayment Rent . Deferred Income include Unearned Revenue . You Can Also Read Out, “ Deferred Expenses VS Prepaid Expenses ” Deferred Expenses are categorized as Current Assets on Balance Sheet as these have life within one year. These are also known as Advance Payments, Deferred Expenses, Expenses Paid In Advance, etc. Deferred Expenses Adjusting Journal Entry: There are two possibilities for Deferred Expenses relating to passing Adjusting Entries : 1. When Prepaid Expenses initially recorded as an Expense 2. When Prepaid Expenses initially recorded as a...

Here we discuss about the adjustments in Final Accounts with example. It is very important topic of Accounting . Adjustments are made at the end of accounting period. For finding Financial Performance (Net Profit) of the Business , there are two systems of ascertaining Net Income of the business. 1. Cash System of Accounting 2. Accrual System of Accounting 1)    Cash System of Accounting Under this system, transactions are recorded only when cash is received or paid. This system ignores the important accounting concept called Matching Concept . For Example, In 2014, we sold goods for Rs.50000 and received Cash for Rs.30000. In this case Rs.20000 is not recorded in the year 2014. It is recorded only when Cash is received for such amount. 2) Accrual System of Accounting Accrual system emphases on Matching Concept of Accounting. We record transaction with the full amount whether the Cash received in part or full. For Examp...