Response to the post on accrual and deferral accounting factors

There are two types of accounting factors, accrual and deferral, which both impact a company’s financial statement. An accrual accounting would require any adjustments to be made before the financial statement is issued. Accruals “are created when a revenue or expense has been earned or incurred but has not been recorded” (Warren, 2018). Whereas deferrals work in the opposite effect of accruals and are reported on the financial statement. Deferrals “are created by recording a transaction in a way that delays or defers the recognition of an expense or revenue” (Warren, 2018). Basically, with accruals the assets and liabilities build up without being reported and affecting the company’s income by not being included in their financial statement; whereas with deferrals both are listed on the account and adjust the company’s bottom line by showing there are outstanding commitments. I pulled Netflix’s most recent 10-K report from 2017 that breaks down their financial statements. Looking at their balance sheets on page 43, we can see the break down in the company’s accrual accounting: Accruals:
Accounts payable …………………………………………….. $359,555
Accrued expenses …………………………………………….. $315,094
Deferrals: Deferred revenue ……………………………………………… $618,622
Both are factored into the liabilities section of the balance sheet to give the true status of the company.

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