Final answer:
Accrual and deferral postings are used to align the recognition of revenues and expenses with the periods to which they relate. A one-time emergency payment would likely be expensed immediately, while prepayments for services like monthly rent or cloud storage would be deferred and expensed over time. Monthly subscriptions are generally accounted for with accrual methods, recognizing the expense each month. The correct answer is option A.
Step-by-step explanation:
In the context of financial accounting, accrual and deferral postings are used to manage the timing differences between when transactions occur and when they are recorded in the accounts. Accrual accounting recognizes revenue when earned and expenses when incurred, while deferral accounting recognizes revenue and expenses when cash is exchanged.
- For a one-time payment for fixing flooding damage, a deferral posting might be appropriate if the payment was made in advance of the service being performed. However, if it's a one-time emergency service, it is likely to be recorded as an expense when incurred with no deferral needed.
- Monthly rent payments for an office building are typically handled with accrual accounting, recognizing the expense in the period the space is used, regardless of when the payment is actually made.
- A one-time payment for a one-year cloud storage service would be initially recorded as a prepaid expense (deferral) and then recognized as expense over the period of use.
- For a monthly subscription to a financial newspaper, it would again likely be treated with accrual accounting, recognizing the expense monthly as each edition is received.
These treatments ensure that the financial statements reflect the actual economic events during the period, matching revenues to the periods in which they are earned and matching expenses to the periods in which they are incurred.