“Do I need to accrue deferred payment?”

When you have a deferred payment, it means you’ve agreed to pay at a later date for services or goods received. Accrual Accounting requires you to record revenues and expenses when they are incurred, not necessarily when cash is exchanged. Therefore, you should accrue a deferred payment to match the expense with the period in which the related benefits or services are received. This helps in providing a more accurate picture of your financial position and performance during the specific Accounting period. To do this, you record a liability on your balance sheet for the amount you owe, and an expense on your income statement. As you make payments in future periods, the liability will decrease, reflecting the reduction in your obligation.