Accrual and deferral are different types of accounting adjustments.
An accrual, however, occurs before a payment or receipt.
An accrual of an expense refers to the reporting of an expense and the related liability in the period in which they occur, and that period is prior to the period in which the payment is made. Accrued expenses are the expenses of a company that have been incurred but not yet paid. An example of an accrual for an expense is the electricity that is used in December, but the payment will not be made until January.
An accrual of revenues refers to the reporting of revenues and the related receivables in the period in which they are earned, and that period is prior to the period of the cash receipt. An example of the accrual of revenues is the interest earned in December on an investment in a government bond, but the interest will not be received until January.
A deferral on the other hand occurs after a payment or receipt.
A deferral of an expense refers to a payment that was made in one period, but will be reported as an expense in a later period. An example is the payment in December for the six-month insurance premium that will be reported as an expense in the months of January through June.
A deferral of revenues refers to receipts in one accounting period, but they will be earned in future accounting periods. Deferred revenue is the portion of a company's revenue that has not been earned, but cash has been collected from customers in the form of a prepayment. For example, the insurance company has a cash receipt in December for a six-month insurance premium. However, the insurance company will report this as part of its revenues in January through June.
