Accruals Help!

cd1985

Hi,

I have a quick query about accruals. I am going through the accounts since the start of the year. I have fixed all prepayments and am now moving on to accruals. I am clear on the process of the prepayments, but not completely sure of the accrual.

My first Invoice from the start of the year is a phone bill which half relates to Dec 2013, I will leave this as it relates to the previous financial year. I am looking in February to see what invoices have a January cost in them. For example I have a mobile bill dated 07/02/2014 which more than half relates to January 2014. Should I post an accrual in January for this amount and reverse the journal in February? The bill covers Jan/Feb but was paid in March. Does the fact it was paid in March mean I have to post an accrual in Feb also or is January the only journal I need to post?

Also I have an Electricity bill dated 30/04/2014 – should I go back to Feb and post the amount related to Feb in an accrual and do the same for March and reverse in April?

Going forward then from June onwards, do I try estimate what the cost may be as I can’t really continue to change month end accounts?

Thanks in advance for your help!!

Maidhci

In respect of what period are you currently preparing accounts? I presume you have already prepared accounts for the previous 5 months and if so, presumably, you do not wish to revise these??

cd1985

Hi Maidhci,

Thanks a mil for your reply. I have completed the month end accounts but want to go back and account for accruals. If I could just get my head around this I could go back and fix the past months and do it for all future months

Thanks

Cyrus

cd1985 wrote: »

Hi,

I have a quick query about accruals. I am going through the accounts since the start of the year. I have fixed all prepayments and am now moving on to accruals. I am clear on the process of the prepayments, but not completely sure of the accrual.

My first Invoice from the start of the year is a phone bill which half relates to Dec 2013, I will leave this as it relates to the previous financial year. I am looking in February to see what invoices have a January cost in them. For example I have a mobile bill dated 07/02/2014 which more than half relates to January 2014. Should I post an accrual in January for this amount and reverse the journal in February? The bill covers Jan/Feb but was paid in March. Does the fact it was paid in March mean I have to post an accrual in Feb also or is January the only journal I need to post?

Also I have an Electricity bill dated 30/04/2014 – should I go back to Feb and post the amount related to Feb in an accrual and do the same for March and reverse in April?

Going forward then from June onwards, do I try estimate what the cost may be as I can’t really continue to change month end accounts?

Thanks in advance for your help!!

accruals arent complex, you are making an estimate for a cost related to that month for which you havent yet received an invoice.

So for example, you have no june phone bill, but its normally around €50, you accrue 50 in june, your p&l is charged 50 and when the actual invoice comes in in July you reverse the accrual. Any difference between the accrual and the actual charge impacts the P&L in July.