Dictionary Definition
deferral
Noun
1 a state of abeyance or suspended business [syn:
recess]
2 act of putting off to a future time [syn:
postponement,
deferment]
User Contributed Dictionary
Pronunciation
- Rhymes: -ɜːrəl
Noun
Extensive Definition
Deferred, in accounting, is any account where the asset or liability is not realized
until a future date, e.g. annuities,
charges, taxes, income, etc. The deferred item
may be carried, dependent on type of deferral, as either an asset
or liability.See also: accrual
Deferred is also used in the university
admissions process. It is the action by which a school rejects a
student for early
admission but still opts to review that student in the general
admissions pool.
Deferral in accounting
The term deferral is most commonly used in accounting as an abbreviation of deferred income (called also deferred revenue) or deferred expense (called also prepaid expense or prepayment).Deferred income is a liability. It is recorded when
an asset (e.g. receivable)
is recorded, but the related income (i.e. revenue) will be earned only in
the future.
Deferred expense is an asset. It is recorded when a
liability is recorded, but the related expense will be incurred only in
the future.
Example: Company A rents its building to Company
B, which has its office in the building. Before the year ending 31
December 2005, the company A issues an invoice to company B. The
invoice covers rent for two years: 1 January 2005 to 31 December
2006.
Total rent for the two years is 1,000.
Accounting in Company A as of 31 December 2005
Debit
Accounts
Receivable 1,000 Credit
Revenue 500 (rent for 2005) Credit
Deferred income 500 (rent for 2006) Accounting in Company B as of
31 December 2005: Debit Rental expense 500 (rent for 2005)
Debit
Deferred expense 500 (rent for 2006) Credit
Accounts
payable 1,000
See also
deferral in German: Stundung