Deferrals occur when a company receives or pays cash before recognizing revenue or expense in the income statement.

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Deferrals refer to the practice of postponing the recognition of revenue or expense until a later date, typically when the goods or services have been delivered or consumed. This can result in cash being received or paid before the corresponding revenue or expense is recognized in the income statement. Examples of deferrals include prepaid rent, unearned revenue, and deferred tax liabilities.

Deferrals Occur When a Company Receives or Pays Cash Before