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The Corporate Finance Institute Accounting
Deferred and accrued expenses
Deferred Expense Accrued Expense
Definition Amounts paid for in advance of The process of recognizing
using assets that benefit more than expenses before the cash is paid
one period
• Prepayment of advertising, • Utility bill received in the mail
Situational examples
insurance, or rent becomes used for the month just completed
up over time • Employees earned wages
before the month ended, to be
paid in the following month
Adjustment Journal Entry One month of XYZ Company’s XYZ Company’s employees
insurance expired in June. The earned $550 during June and are
original payment of $800 covers paid in July.
June through September.
DR Wages Expense: 550
DR Insurance Expense: 200 CR Wages Payable: 550
CR Prepaid Insurance: 200 DR Wages Payable: 550
CR Cash: 550
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