meadows manufacturing follows the accrual basis. an accrual results when ____________ and a deferral results when

An accrual results when revenues or expenses are recognized before cash is received or paid, and a deferral results when cash is received or paid before the related revenue is earned or the expense is incurred.

Filling in the sentence

Meadows Manufacturing follows the accrual basis. An accrual results when revenues are earned or expenses are incurred before cash is received or paid , and a deferral results when cash is received or paid before the related revenue is earned or the expense is incurred.

Simple examples

• Accrual: Perform a service in December, get paid in January → record revenue in December (accrued revenue).

• Deferral: Get a year’s subscription cash today but will deliver magazines over the year → record unearned (deferred) revenue now and recognize revenue later as you deliver.

These timing differences are what adjusting entries for accruals and deferrals are designed to fix under the accrual basis.

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