Asked Nov 26, 2019


Phone companies bill their customers after they provided them with cellular service. So if a customer receives their October phone usage during the month of November. From the phone company's perspective, they make an adjusting entry at the end of October if they want the revenue they earned at the end of the month shows up on the October income statement. From the company's perspective would this adjusting entry be an example of accrual or a deferral, why?


Expert Answer

Step 1

So basically there are two concepts regarding this from accounting perspective:

  1. Deferred Revenue
  2. Unbilled Revenue
Step 2
  1. Deferred Revenue: When money is received in advance, and the concerned goods and service have not yet been provided. In this scenario, cash is received, but is recognized as income in the income statement in the period in which the goods and service are provided. Any advance payment received would come under this category.
  2. Unbilled Revenue: The r...

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