Which of the following illustrates a deferral adjusting entry?

The choice of recording prepaid rent as an expense over time is an illustration of a deferral adjusting entry because it involves postponing the recognition of an expense until it is actually incurred. When a company pays rent in advance, it initially records this payment as a prepaid asset on the balance sheet. As time progresses and the rental period elapses, the company must adjust its accounts by recognizing the portion of prepaid rent that corresponds to the period that has passed. This process decreases the prepaid asset and recognizes the rent expense on the income statement, reflecting the usage of the space over time.

Deferral entries are characterized by this shifting of expenses or revenues to a period in which they contribute to earnings, ensuring that financial statements more accurately represent the company's performance during a specific period. In contrast, accrued interest income and unearned revenue involve recognizing income or revenue before cash is received or before it is earned, which are examples of accruals rather than deferrals. Similarly, recording cost of goods sold immediately relates to costs incurred at the time of sale, which does not reflect the deferral concept.