Cost accrual

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If cost has been accrued using a reversal journal and invoice has not been send on the following month should the cost be reaccrued?

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By paulhammett
14th May 2024 19:39

Yes

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Replying to paulhammett:
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By Confusedabit
14th May 2024 20:19

Thank you but is this not going to cause duplication? Also, cost should be reflected in the month it was incurred so if the cost was incurred in February but no invoice received, then we post the accrual reversing journal at Feb month end to show this cost.
Dr expense
Cr accrual

It is then reversed on the 1st of Mar so
Dr accrual
Cr expense

So nil result. Is this then correct to post it again on Mar month end from an accrual concept point of view?
Actually, now when I wrote all this down it makes sense so on Feb accrual account we have cr sitting (when we look at Feb account in isolation because when we run a report for Feb and Mar the balance is nil right?). So from an audit point of view it is correct when Feb is tested but what if we reaccrue in Mar again when invoice not received? We then have cost accrued in Feb and Mar so double counting. I’m confused…

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By Paul Crowley
14th May 2024 19:41

Yes

Thanks (1)
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By Confusedabit
14th May 2024 21:06

Thank you but is this not going to cause duplication? Also, cost should be reflected in the month it was incurred so if the cost was incurred in February but no invoice received, then we post the accrual reversing journal at Feb month end to show this cost.
Dr expense
Cr accrual

It is then reversed on the 1st of Mar so
Dr accrual
Cr expense

So nil result. Is this then correct to post it again on Mar month end from an accrual concept point of view?
Actually, now when I wrote all this down it makes sense so on Feb accrual account we have cr sitting (when we look at Feb account in isolation because when we run a report for Feb and Mar the balance is nil right?). So from an audit point of view it is correct when Feb is tested but what if we reaccrue in Mar again when invoice not received? We then have cost accrued in Feb and Mar so double counting. I’m confused…

Thanks (0)
Replying to Confusedabit:
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By Paul Crowley
14th May 2024 21:15

If these are reversing journals, then you do it each month until the invoice arrives.

Thanks (6)
Replying to Confusedabit:
RLI
By lionofludesch
14th May 2024 23:18

Confusedabit wrote:

Thank you but is this not going to cause duplication? Also, cost should be reflected in the month it was incurred so if the cost was incurred in February but no invoice received, then we post the accrual reversing journal at Feb month end to show this cost.
Dr expense
Cr accrual

It is then reversed on the 1st of Mar so
Dr accrual
Cr expense

So nil result. Is this then correct to post it again on Mar month end from an accrual concept point of view?
Actually, now when I wrote all this down it makes sense so on Feb accrual account we have cr sitting (when we look at Feb account in isolation because when we run a report for Feb and Mar the balance is nil right?). So from an audit point of view it is correct when Feb is tested but what if we reaccrue in Mar again when invoice not received? We then have cost accrued in Feb and Mar so double counting. I’m confused…

You've got the reasoning spot on.

Right up to the point where you draw the conclusion and it all goes wrong.

Thanks (2)
Routemaster image
By tom123
15th May 2024 07:36

My preference is not to automatically reverse any accruals, but review them each month to see if they need to be retained longer.

Some of my accruals build up to annual charges, and I don't want to have to re-enter them twelve times

Thanks (6)
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By Rgab1947
16th May 2024 10:49

Yes

Till an invoice is received or payment made.

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By jwgrogan
16th May 2024 13:24

When did people lose the gumption to work this sort of thing through with pen, paper and T-accounts and become better bookkeepers in the process?

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Replying to jwgrogan:
RLI
By lionofludesch
16th May 2024 13:43

jwgrogan wrote:

When did people lose the gumption to work this sort of thing through with pen, paper and T-accounts and become better bookkeepers in the process?

Well said, John !!!

Thanks (3)
Replying to jwgrogan:
By tonyaustin
16th May 2024 14:59

Does everyone using accounting software understand T accounts and double entry bookkeeping, even if they do refer to dr and cr?

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Replying to tonyaustin:
RLI
By lionofludesch
16th May 2024 15:13

tonyaustin wrote:

Does everyone using accounting software understand T accounts and double entry bookkeeping, even if they do refer to dr and cr?

Wouldn't have thought so. They won't even know where the window is.

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Replying to lionofludesch:
Routemaster image
By tom123
16th May 2024 15:59

I've never understood this Window and Door stuff - I must be too young!!

My AAT apprentice spent a fair bit of time looking at stuff from a T account view - so it is still taught.

I suppose it depends on the user requirement. My purchase ledger staff don't tend to need to know what they are posting from a T account view.

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Replying to tom123:
RLI
By lionofludesch
16th May 2024 16:11

tom123 wrote:

I've never understood this Window and Door stuff - I must be too young!!

My AAT apprentice spent a fair bit of time looking at stuff from a T account view - so it is still taught.

I suppose it depends on the user requirement. My purchase ledger staff don't tend to need to know what they are posting from a T account view.

Come on, Tom. It's a real thing. It was explained on here not so long ago.

In the days before decent artificial lighting and folk were not allowed to be left handed, clerks would sit with the light source (viz. WINDOW) on their left so that they weren't working in their own shadows.

Hence the debit would be on the side nearest the window.

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Replying to tonyaustin:
By Ruddles
16th May 2024 15:37

Clearly the answer to that question is "no".

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