Two types of balancing accounts exist to avoid fictitious profits and losses that might otherwise occur when cash is paid out not in the same accounting periods as expenses are recognized, because expenses are recognized when obligations are incurred regardless when cash is paid out according to the matching principle in accrual accounting. Cash can be paid out in an earlier or later period than obligations are incurred (when goods or services are received) and related expenses are recognized that results in the following two types of accounts: