Accountancy/Accruals
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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:
| Date | Description | Post Ref. |
Dr | Cr | |
|---|---|---|---|---|---|
| 2005 Feb |
28 | Electricity (Expense) | 130 | ||
| Unpaid electricity (Liability) | 130 | ||||
Later when this bill gets paid
| 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.