Business performance may seem undervalued or overvalued if accruals and deferrals are not used correctly in the accounting.
Accruals and deferrals occur only when a business uses accrual-based accounting methods. If accruals and deferrals are not used correctly in the accounting cycle, certain accounts may seem undervalued or overvalued.
Under the accruals, conditions are satisfied to record a revenue or expense, but money has not changed hands yet. An accrual occurs before a payment or receipt.
Under the deferrals, money has changed hands, but conditions are not yet satisfied to record a revenue or expense. A deferral occurs after a payment or receipt. Read full article "Accruals and Deferrals"
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