" ...Would you please inform me when the accrued expenses need to be accounted for in system (AP)? is it in the starting of every month? and after accounted must it be reversed immdiately immediately after getting into the corresponding expense for the accrual or must it be performed in one particular go in the ending of every month"
Timing of accruing expenses
Prior to answering the query, we will need to discover the nature of accruals, which can be:
- to account for service received however billing not received from suppliers
- to account for expenses incurred ( e.g. montly provision for bonus)
Therefore, practially, accruing for expenses need to be performed in the ending of every single month when undertaking month end closing. Yes, the amount need to be reversed out promptly upon getting the billing / payout the expenses. As one example of
Corporation XYZ has received repair & maintenance services from the service provider. The service amount of money has been contracted at US$500. However, in the end of the month, no billing has been received and the subsequent entry have to be passed:
Debit: Repair Expenses
Credit: Accrued Expenses
Upon getting the billing from service provider, the following entry really should be passed to reverse the accruals:
Debit: Accrued Expenses
Credit: Trade Creditors
