lgarside Registered Posts: 122 Dedicated contributor 🦉
Can someone please help me out with a problem relating to accruals.

If you have to accrual for say 3 months and you are producing a profit and loss account each month, obviously the accruals will be reversed month on month but when the invoice finally arrives and gets posted to the expense account do you have to do anything with this because this expense won't match for that month as it obviously relates to 3 months and will therefore be too much for that month?

Hope this makes sense!!!!!


  • peugeot
    peugeot Registered Posts: 624 Epic contributor 🐘

    Forgive me if I'm misunderstanding but I am at a loss as to why you would accrue for goods/services received, but not yet invoiced, and reverse it monthly until the bill comes in. By doing this you're reducing profits at the start of the accrual (cr accruals dr expenses), increasing them during the reversal (dr accruals cr expenses) and reducing them again for the full amount of the original accrual when the invoice eventually comes in or it is paid via the bank (cr creditors/bank dr expenses).

    I can see why prepayments would be reversed monthly but the purpose of accruals is to provide for goods/services received but not yet billed so when the bill comes in you would cr payables, dr accruals. Or if the bill is posted direct to expenses cr expenses dr accruals.

    Apologies if I have misunderstood your post but normally an accrual would stay in until the bill has been received.

    Best wishes
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