A theater producer's accounting year ends on June 30.Which of the following year-end transactions or events results in an accounting entry referred to as a deferral?
A)actors work on June 29 and 30,but are not paid until July 5
B)electricity for the month of June is not paid because the bill is not received until July
C)"extras" are paid in cash on June 30 for the June 30 performance
D)theater-goers pay cash on June 30 for performances that will occur in July and August

Question

Quizplus · Accepted Answer

Deferrals involve recognition of revenue or expenses that are prepaid or collected before the related goods or services are delivered. In this case, receiving payment for future performances (July and August) before those performances occur is a deferral, as the revenue is recognized before the service is provided.

A Theater Producer's Accounting Year Ends on June 30