1.

Deferrals versus Accruals

Label each of the following as a deferral or an accrual, and explain your answer.

1. The company recorded supplies usage for the month.

2. A customer paid in advance for services, and the company recorded revenue earned after
providing service to that customer.

3. The company recorded salaries that had been earned by employees but were previously
unrecorded and have not yet been paid.

2. YOUR TURN

Income Statement and Balance Sheet

Take a couple of minutes and fill in the income statement and balance sheet columns. Total them when
you are done. Do not panic when they do not balance. They will not balance at this time.