Confusion when doing accruals

Elliot174

Hi Guys,

Having a mind blank on accruals!

Looking at the previous accruals, i am sure my place of work is doing them wrong.

Basically our Gas and electric bills are billed the month after. So Jan's electricity would be billed 01/02/16.

How would this be entered in to the accounts?

Currently we do the following

Invoice posted on Supplier acc 01/02/16

Date 01/02/2016
Dr Electricty
Cr Accruals

Date 01/03/2016
Cr Electricty
Dr Accruals

This isn't correct as far as i think so i would like to change it going forward and show my manager. Can someone please help show me the correct way? i seem to think the reversal should be the month before so

Date 01/02/2016
DR Electricity
CR Accruals

Date 31/01/2016
Cr Electricity
DR Accruals

Getting so confused now though means I've been looking at it for so long!!

stevef

An accrual is where you debit an account in the period the goods or service is received when the payment will be made in a subsequent period. At the same time, to complete the double entry, you set up a credit in the period when the payment will be made. So for electricity consumed in January

In January
DR Electricity
CR Accruals

In February
DR Accruals
CR Electricity

For electricity consumed in February

In February
DR Electricity
CR Accruals

In March
DR Accruals
CR Electricity

I think your work place has got it right but the month is out of alignment.