Why are some expenses deferred? Generally, expenses are deferred in order to comply with the accounting guidelines known as the matching principle to illustrate the concepts ,leťs assume that a company pays $3,000 on december 30 to rent a warehouse for the upcoming 3months period of jan 1st through march31st since,none of the $ 3,000 expires or is used up in december, none of amount should be reported as rent expenses on the income statement for the month of december . Hence,the $3,000 is deferred to a balance sheet account such as prepaid rent (or prepaid expenses ) which is current asset account
Posted on: Wed, 13 Aug 2014 04:37:35 +0000