{"id":5330,"date":"2015-05-06T05:50:14","date_gmt":"2015-05-06T03:50:14","guid":{"rendered":"http:\/\/www.officetodo.com\/public\/?p=5330"},"modified":"2015-05-03T05:52:12","modified_gmt":"2015-05-03T03:52:12","slug":"recognizing-accruals","status":"publish","type":"post","link":"http:\/\/www.officetodo.com\/public\/recognizing-accruals\/","title":{"rendered":"Recognizing accruals"},"content":{"rendered":"

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 to close at a later date (that is at a date after you\u2019ve closed the period).\u00a0<\/p>\n

In such situations the thing you ought to do is accrue for the expense and at a later date recognize the invoice against the already accrued liability. With this you\u2019d have the expense within proper period and the liability is only recognized from an accrued liability account to supplier payable account.<\/p>\n

Let me show you this with accounting entries:<\/p>\n\n\n\n\n\n\n\n\n\n\n
<\/td>\n<\/tr>\n<\/tbody>\n
#<\/strong><\/td>\n<\/td>\nDebit-Credit<\/strong><\/td>\n<\/td>\nAccount name<\/strong><\/td>\n<\/td>\nAmount\u00a0<\/strong><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
1<\/em><\/td>\n<\/td>\nDebit<\/em><\/td>\n<\/td>\nAn expense account<\/em><\/td>\n<\/td>\n100<\/em><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\n<\/td>\nCredit<\/em><\/td>\n<\/td>\nAccrued liabilities<\/em><\/td>\n<\/td>\n100<\/em><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

With this entry you\u2019ve essentially shown that you have a liability and you incurred an expense. That is in fact what happened regardless of there being an invoice to show it at the date of the reporting period end. Normally you have either some form of initial price estimate or purchase order to base your entry on.<\/p>\n

And once you receive the invoice, you recognize the following entry:<\/p>\n\n\n\n\n\n\n\n\n\n\n
<\/td>\n<\/tr>\n<\/tbody>\n
#<\/strong><\/td>\n<\/td>\nDebit-Credit<\/strong><\/td>\n<\/td>\nAccount name<\/strong><\/td>\n<\/td>\nAmount\u00a0<\/strong><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
1<\/em><\/td>\n<\/td>\nDebit<\/em><\/td>\n<\/td>\nAccrued liabilities<\/em><\/td>\n<\/td>\n100<\/em><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\n<\/td>\nCredit<\/em><\/td>\n<\/td>\nPayable to suppliers<\/em><\/td>\n<\/td>\n100<\/em><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

With this entry you\u2019ve now shown that you received the invoice and this is reflected by decreasing the accrued liabilities account against increasing supplier payables.<\/p>\n","protected":false},"excerpt":{"rendered":"

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 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38],"tags":[],"class_list":["post-5330","post","type-post","status-publish","format-standard","hentry","category-1-10-accruals"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5330","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=5330"}],"version-history":[{"count":1,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5330\/revisions"}],"predecessor-version":[{"id":5331,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5330\/revisions\/5331"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=5330"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=5330"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=5330"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}