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:

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.