Recognizing income or expense in a future period.
If John received $4,000 in May, but didn’t do the work until June, we would record the income in June, the month the work was completed. We would say the income was deferred. If John paid $6,000 for 6 month’s rent, he would deduct only $1,000 each month until the six months’ rent was used up. We would say the prepaid rent was a deferred expense.
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