Question

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

a) Recording accrued interest expense.
b) Booking revenue from a service provided in advance.
c) Recognizing depreciation on machinery.
d) Posting salary payments to employees.
e) Receiving cash for services to be rendered next month.

Answer 1

An example of a deferral adjusting entry is booking revenue from a service provided in advance.

Step-by-step explanation:

An example of a deferral adjusting entry is booking revenue from a service provided in advance. A deferral adjustment is made when a cash transaction occurs but the revenue or expenses related to that transaction are recognized at a later date.

For example, if a company receives cash in advance for a service it will provide in the future, it would record the cash received as a liability and then recognize the revenue as it provides the service. This entry ensures that the revenue is recognized in the period in which it is earned.

Other options listed in the question, such as recording accrued interest expense, recognizing depreciation on machinery, and posting salary payments to employees, are not examples of deferral adjusting entries, as they do not involve the recognition of revenue or expenses at a later date.