Archive / 1.10 Accruals

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Recognizing accruals

The thing with accruals basis of accounting is that sometimes you need to accrue for some expenses. Occasions such as this arise when you need or want to close your reporting period but as it happen, your supplier is set to send you an invoice for services or goods received within the period you want […]

Releasing reserves

As you obtain information that the entity is likely to incur outflows from certain events, you treat them as provisions and recognize respective liabilities and expenses as soon as the information becomes available to you. However, what happens if it turns out that there have been changes to the situation so that that entity is […]

Provisions for future expenditure

As you know, an expense arises when the obligation to transfer economic benefits arises, not when the expenditure actually incurred. That’s called accrual based accounting and as such it’s important to understand all conditions of certain agreements and transactions. It’s crucial to see those moments the obligation actually arises.  (more…)

Not sure I have to pay, what should I do?

Every now and then there are situations which may but may also not result in expenses for the company. It’s called uncertainty and something to measure it is called probability. In a situation where it’s unsure whether you have to pay anything or not, it’s really difficult to recognize the balance in the accounts as […]

What should I do with a financial support promise received from another company?

In a situation where your company is facing some potential financial difficulties or is going to face a possible liability that’s so big if paying it, it would mean bankruptcy, there’s an option to receive a promise from the owners or similar to get full financial support if a situation arises. Essentially what’s done, is […]

Derecognizing accruals

You’re accruing for missing invoices and possibly even revenue for which you haven’t issued an invoice yet into your balance sheet. There is a certain amount as a liability or an asset (in case of revenue accrual) on your balance sheet and everything couldn’t be more accurate. All your expenses and income are recognized in […]

Accruals – get into the habit of doing them

Accruals are something you create and recognize on the balance sheet for expenses and income when you haven’t gotten or haven’t issued the invoice yet, but you do know that it’s probable the transaction will happen and it does relate to the period at hand already. Whereas you do not have the document for it, […]