[Anonymous]

Hi,

I just want to clarify something for myself.

At a work setting, when someone says they want to “make an accrual”, do they mean they are just crediting a liability (like accounts payable), and debiting an expense account? Or does it just mean they are making an entry to a liability account?

I understand the textbook concept of an accrual, but in a work setting it seems a little vague to me. Basically, what is going on when someone says they are going “to do an accrual”?

Thanks!

[stoleway]

Yes, the work place setting is a little bit different from what you learn in the books.

Firm's have always developed their own strategy in solving complicated accounting problems.

When you accrue a liability it means that you're recognising an expense that will paid in the future.

Assuming an attorney performs a service for your company and has not billed you yet, you can accrue this by debiting legal expense and crediting liability(payable), I heard some firms set up an account like “accrual” that is always credited when this happens. To the seasoned accountants here, you can chime in and please correct me if im wrong

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[mla1169]

Sure creating a liability and debiting an expense account are one example of making an accrual. Another example is if revenue can be recognized but for some reason hasn't been invoiced-you could accrue for thar sale too. In most basic terms it means making the P&L and balance sheet reflect all transactions that it should even if the standard transaction (vendor invoice, billing department) haven't happened. Just like all entries it has to be two sided so you couldn't just hit the expense or liability.

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[Kelestrel]

The above definitions are valid, but workplaces often have definitions that aren't exactly textbook. Ask your co-workers to clarify for you, then keep both definitions in mind.

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[Anonymous]

I would think that accrual means some manual journal entry DR Expense CR some temp liab account.

The thing is, if you are using an accounting software, recording something as account payable usually means taking the actual invoice and entering a payment voucher. Accrual is usually made when there is no invoice yet

[Anonymous]

I would ask them to be specific. I mean, the word accrual is misused … so many… times in the workplace.

[Author]

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