https://www.youtube.com/channel/UC_GblYiME_squ8J1vgv8oRA

1. TRADE CREDIT, ACCRUED EXPENSES AND
DEFERRED INCOME

2. TOPICS TO BE
COVERED:-
TRADE CREDIT:-DEFINATION
INTODUCTION
ADVANTAGES
DISADVANTAGES
ACCRUED EXPENSES:-INTODUCTION
EXAMPLE
DEFERRED INCOME:-INRODUCTION
EXAMPLE
DIFFERENCE B/W ACCRUED EXPENSES
AND DEFERRED INCOME

4. DEFINATION
“A supplier sends goods to the buyer on
credit which the buyer accepts, and
thus, in effect, agrees to pay the amount
due as per sales terms in the invoice.”

5. INTRODUCTION
Arises out of transfer of goods,
It is unsecured,
Granted for periods ranging from 15
days to 3 months,
Buying firm receives supplies without
paying immediately

6. INTRODUCTION
Reflects the buyer’s power to
purchase now and pay later,
Indicates the seller’s faith in the
buyer,
No securities required for getting
trade credit.

7. ADVANTAGES
Easy availability,
No formalities involved,
Convenient method of raising
short term finance,

8. DISADVANTAGES
Prices charged for credit
sales are usually higher,
Supplier has to bear a loss of
bad debts,
Requires a large working
capital to supply goods on
credit.

9. ACCRUED EXPENSES

10. ACCRUED
EXPENSES
Accrued expenses are expenses
incurred but not paid yet.
Interest free source of
finance.
The accrued expenses
account is a short-term
liability.

11. EXAMPLES OF ACCRUED
EXPENSES
Accrued
wages and
salaries
Accrued
taxes

12. Deferred income
• Any income that is received before it is
earned.
• Rent paid in advance is an example of
deferred income that is received during
one accounting period but earned in
later accounting period.

13. DIFFERENCE B/W
ACCRUED EXPENSES AND
DEFERRED INCOME

14. Accrued Expenses
Deferred Expenses are
expenses paid in advance
but not yet incurred
are expenses
already incurred
but still unpaid

15. Deferred expenses are in
fact an asset because it
stands as a prepaid
expenses.
Accrued Expenses are in
fact a liability because it
stands as unpaid
expenses.