[Jasminekoko]

Hi,

I am having trouble distingushing those two, such as def. rev, def. exp, accrued rev., acrrued exp.. Also current liability vs. accrued liability were mentioned on Ninja Notes, I still get confused. Can someone please help me? It is much appreciated.

[Marlya]

Def revenue = money received for workservices unperformed, you haven't actually EARNED the money but you have received therefore it is a liability

Deferred expense = money you paid for something in advance of receiving benefitproduct. Best example is general liability insurance, you pay an annual premium for a year worth of insurance and you expense a portion of it monthly while the balance of the premium paid sits in an asset account.

Accrued expense = the opposite of deferred expense. This typically happens at monthyear end, for example you know you received some inventory but you have not received the invoice from the supplier, so you have to accrue the expense on your books to recognize the expense. This is a liability to the company = money due not yet paid.

Current liability, is just how it sounds it is current and due in the current period or within 12 months, if the due date extends beyond 12 months then it is not current.

I hope this helps a little.

BEC - 66, 77 (3/14* expired), 82 (11/15)
AUD - 58 (4/14), 76 (8/14)
REG - 75 (6/14)
FAR - 72 (11/14), 67 (1/15), 68 (5/15), 68 (7/15), 80!!!! (11/15)

Licensed Florida CPA. God is Good!!

[Leach2587]

Deferred Revenue = unearned revenue (Money for nothing) so its a liability. (You are the seller)

Accrued Revenue = Accounts receivable (You are the seller)

Accrued Expense = Accounts Payable or accrued liability (Going to have to make a payment in the future) (You are the buyer)

Deferred Expense = Prepaid asset (you paid the money but haven't gotten anything in return) (You are the buyer)

[Determined CPA]

For an accrual, think of how you accrue vacation time at work. At the end of each month let's say you accrue 2 days of vacation time. It's yours but you didn't take it yet. You've earned it but didn't take it so your employeer accrues for that.

For a deferral, think of something you've received but didn't necessarily earn. In this case, it's revenue but it needs to be deferred until you can recognize it (when you perform services related to that income you received). Until you perform, it's a liability to you bc you have the money.

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Jasminekoko]

Thank you for all your responses. It helps a lot.

I am still confused at “the current liability (Def. Exp): payments have been received but cannot be recorded as revenue yet ” mentioned on page 25 of Ninja Notes. Isn't CL is anything you owe that have not been paid within 12 months period? Jeff said that payment has been received. I am lost.

[mt3130]

It sounds like you're talking about deferred revenue. If a client engaged you to prepare his tax return, paid you up front, but you have not yet performed the work you were paid for, you have to record that as a liability. That money does not belong to you until you have earned it via performance of the work you were hired to do (in this case, prepare a tax return).

REG - 90 (08/2014) - Study Time = 6 days
FAR - 89 (10/2014) - Study Time = 9 days
BEC - 83 (11/2014) - Study Time = 4 days
AUD - 89 (01/2015) - Study Time = 2 days

Final score released - 2/4/15
Application mailed - 2/5/15
Licensed CPA - 2/12/15

[Jasminekoko]

Yes, it is def. rev. Thank you for your explanation.

[Mike]

Listening to the NINJA Audio. “An accrued liability is a deferred expense, an expense that has been incurred but not yet paid”. If it's incurred wouldn't that make it accrued, not deferred, since no cash payment is made?

FAR - Passed 05/15
AUD - Passed 08/15
REG - Passed 11/15
BEC - Passed 02/16

"On the road to Utopia" - Todd Rundgren

[Jasminekoko]

@ohfuggles: I agreed, accrual liability is accrued expense and it has incurred but not yet paid, not deferred expense as mentioned on Ninja Note. You should ask Jeff directly. I meant to ask him too but since he doesn't answer a question I posted on here, so I am reluctant to ask him. I am working on the Statement of Cash Flow and came across a question with accrual liability, I thought I would check back on here . You might need to post a separate question on here.

[LongShot]

I've got a bunch of kids running and screaming right now, so it was hard to concentrate on these posts, but it seems like this might be just a confusion in terminology.

It looks like deferred revenue and liability are just unearned revenue and prepaid expense (those are the terms I used in school and still at work)-money has transferred hands, but future action is still required.

Accrued revenue and liability is where the required action has occurred, but money has not yet changed hands.

FAR - 75
AUD - 72; 87
REG - 64; 74; 84
BEC - 88

Done!!

[LongShot]

Sorry, just looked back at this and saw that marlya and leach already explained this up above.

FAR - 75
AUD - 72; 87
REG - 64; 74; 84
BEC - 88

Done!!

[Anonymous]

I actually had trouble remembering how to distinguish the two recently and created a “short-cut” to help me remember. There are 4 words you need to know. Accruals, Deferrals, Beginning (B), End (E).

Accruals start with A and the next letter after A is B (Beginning).

Deferrals start with D and the next letter after D is E (End).

So instead of matching Accruals and Deferrals with the letter that comes after it, Accruals = Beginning & Deferrals = End. you match it with the opposite letter.

So… Accruals = End (Money received @ the End) & Deferrals = B (Money received @ the Beginning)

[Jasminekoko]

@wannabecpa: very interesting method, I have one similar with conversion from cash to accrual, many thanks.

[Author]

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