Under the accrual basis of accounting, recording deferred revenues and expenses can help match income and expenses to when they are earned or incurred. This helps business owners more accurately evaluate the income statement and understand the profitability of an accounting period.
Why would you defer an expense?
You should defer expenses when generally accepted accounting principles or international financial reporting standards require that they be included in the cost of a long-term asset and then charged to expense over a long period of time.
What expenses can be deferred?
What can deferred expenses be used for?
- Rent on office space.
- Startup costs.
- Advertising fees.
- Advance payment of insurance coverage.
- An intangible asset cost that is deferred due to amortisation.
- Tangible asset depreciation costs.
