An accrual is the effect of receiving goods or services before cash payment. This will most often result in a liability on the company's books, usually as a payable. Another type of accrual results from recognizing revenues before payment. Note this does not include unearned revenue, which is a deferral.
Sometimes a business uses a service (e.g. electricity) which it has not yet been invoiced for. The double entry for this is:
Journal - Page 1
|
Date |
Description |
Post Ref. |
Dr |
Cr |
|
|---|---|---|---|---|---|
|
2005 Feb |
28 |
Electricity (Expense) |
130 |
||
|
Unpaid electricity (Liability) |
130 |
||||
Later when this bill gets paid
Journal - Page 1
|
Date |
Description |
Post Ref. |
Dr |
Cr |
|
|---|---|---|---|---|---|
|
2005 Mar |
12 |
Unpaid electricity (Liability) |
130 |
||
|
Cash (Asset) |
130 |
||||
It is possible for an accrual to be made for telephone call charges in the period while the line rental (paid in advance) is a prepayment.
- 1826 reads
