siva Registered Posts: 54 ? ? ?
Hi All,

I am new to this thread, i need a massive help from you guys.

I am working in finance for a ltd company, due to some problems my manager left and i had to do all her work, i didi not have any previous experience, but managing so far with help from our accountants.

I did sep P & L and i am confused about the accruals.

Our directors expense has not been received since march so accrued every month, from march, so aug i had accrued for expense from Mar - Aug, received expense for march posted as march and so taken out march accrued expense in sep so my accrual now is for Apr - Sep. my question is why am i showing expense from previous months in this month also my travelling account has gone to negative so i think i have made a mistake in reverse accrual.

i accrued £300 in Aug, so Reversed £300 in Sep and posted £250 in Sep, this gives me -£50 balance on the account. I can clearly see its wrong but i dont have any idea how this works.

Please help me.




  • Lindylou
    Lindylou Registered Posts: 9 Regular contributor ⭐ ? ⭐
    Hi Siva
    Accruals (& indeed prepayments ) work in one of 2 ways.
    Either each month add that month's charge to accruals so that the P & L has that month's charge & accruals has the cumulative total. ie with the travel example, Sep = £300, Oct = £250 to travel & £250 added to £300 in accruals. There would be no reversals with this method. Travel has £550 over 2 months & accruals has £550 total.
    The other way would be to charge £300 in Sep. In Oct rev the £300 & charge £550. Thereby giving a net charge of ££250 to P & L & a total accrual of £550.
    I prefer this method as it forces thought each month about what the accrual is made up of. The non reversal way can sometimes lead to an amorphous balance in accruals that cannot always be identified unless good notes kept.
    Either way is good. Personal pref I guess.
    Hope that helps? a bit garbled cos actually quite hard to explain without scribbling on a piece of paper!
Privacy Policy