Accruals

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT member discussion
I have tried to do a search for Accruals, but i got totally confused so i'm sorry if someone has already asked this......

How do you work out Accruals? I work in a Practice and i would like to know how to do them properly. I tried looking back at last year's work, but that didn't show the workings or where you get the figures from.

For Accountancy, for example, do you need to look at what they have paid during the year? Any help you could give me would be fantastic!

Thanks XXX

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accruals

    Slightly confused.....

    Do you mean you have accruals b/f from last year;

    or

    You want to make a provision for accruals in this year - i.e you want to include net purchases for this year but haven't received purchase invoices yet...
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accruals

    To accrue for something is to bring a cost in for something that you havent actually received a bill for yet. (basically)

    e.g. you pay rent every at the end of every six months, for the six months just gone. so if youre next rent bill is March 31st 2006, but youre financial year end is 30th December 2005, that means you've had rent for Oct/Nov/Dec and you havent put any cost for it in the accounts yet. so you need to put an accrual in for three months. its all about the "accruals" concept and matching costs to revenues.

    As we know to increase the rent expense it is
    DEBIT Rent
    then the accrual must be
    CREDIT Accrual (current liability)

    Does that help?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accruals

    If your clients so wish, you might also have to "accrue" sales. For example, the client might do work in December, and agree sales for items which cannot be invoiced until January, when the contract begins. In this case, you would be matching sales to overheads incurred in an earlier period.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accruals

    The accrual for accountancy is usually equal to the Accountant's bill for his/her work on the year end, plus any previous work he/she hasn't invoiced which related to the year you are working on. Obviously the client won't know how much this bill is until you have finished your work on his year end, so it has to be an accrual.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accruals

    Thanks everyone for your input, it has definetly helped a lot.

    Thanks again for taking time!!!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accruals

    Can I refer you to my posting on a different board: http://www.aat.org.uk/forums/?portlet_action=true&action_wid=2451&rp_2451_requestURI=/posts/list/9317

    Hope it helps.

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