Question

what is a deferral as it relates to accounting. Can you provide an example of a deferral accounting entry?

Answer 1

A deferral means that the company will postpone recognition of an expense/revenue until an item is actually used.

In other words, any delay in recognition of accounting transaction such as revenue/expense.

Example:

For xyz co. rent is received in advance and the service is not delivered then it should defer recognition of the payment as revenue until such time as it delivers the related services.

For the same above, xyz co. records journal as debit cash and credit unearned revenue(liability account). In the following month, xyz co. delivers the rental service and records the journal as debit unearned revenue, credit revenue. Thus, the unearned revenue liability account was effectively a holding account until xyz co. could complete the providing rental service.