During the year ended February 28, 2021, Aritzia Inc. (Aritzia) recorded numerous accruals and deferrals. As a long-term employee of Aritzia’s accounting and finance staff, it is your job to explain the effects of accruals and deferrals on Aritzia’s financial statements. Suppose the following questions were raised at the shareholders’ meeting:

1. “Prepaid expenses” in the amount of $23,452,000 are listed on the February 28, 2021, balance sheet. What items could be included in this balance, and why is this account listed as a balance sheet account instead of an expense account?

2. “Accounts payable and accrued liabilities” is shown on the balance sheet in the amount of $131,893,000. Define an accrued liability and give an example of items that could be included in this liability.

3. What is depreciation, and how much depreciation has been recorded for the computer hardware between March 1, 2020, and February 28, 2021?