Deferred tax liabilities are shown as long term liabilities on the balance sheet of a business, and represent obligations to pay income tax at some point in the future arising from temporary timing differences.
Tag: Deferred
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Accrued and Deferred Income and Expenditure Journals
The accrued and deferred income and expenditure journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of accrual and deferral transactions.
In each case the journal entries show the debit and credit account together with a brief narrative.
Accruals and Deferrals
Unearned Revenue Journal Entry
Unearned revenue is generated when a business supplies its services to a customer and the services are invoiced in advance.
For example, suppose a business provides maintenance services and invoices for annually in advance. At the time of invoicing the service has not been provided and none of the revenue has been earned, it therefore needs to be credited to the unearned revenue account.
Cash Advance Received From Customer
When a business receives a cash advance from a customer for goods not yet delivered, it needs to record this a balance sheet liability and not revenue. When the goods are delivered, the revenue is earned, and the cash advance can be used to clear the balance on the customer accounts receivable account.
Revenue Received in Advance Journal Entry
Deferred Revenue Journal Entry
Deferred revenue is generated when a business supplies its services to a customer and the services are invoiced in advance.
For example, suppose a business provides web design services and invoices for annual maintenance of 12,000 in advance. At the time of invoicing the service has not been provided and the service revenue has not been earned, it therefore needs to be credited to the deferred revenue account.