Some feedback on our posts for accruals

http://faoblog.com/processes-record-report-r2r-general-accounting-accruals-3/

  • It is nothing but outstanding expenses, which are needed to provide in month end or year end accounts. Like that, even income also to be provided in accounts, like Interest accrued but not received etc. – By Gouri Sankar

  • Accrued expense or income is expense which has been incurred but not yet paid or yet not earn. This is the example of Expense must be recorded in the accounting period in which it is incurred. Therefore, accrued expense must be recognized in the accounting period in which it occurs rather than in the following period in which it will be paid.

Example :XYZ LTD pays loan interest for the month of December 2011 of Rs. 20,000/- on 10th January 2012. XYZ LTD has an accounting year end of 31st December 2011.

1)

Dr. Interest Expense Rs. 20,000/-

Cr. Interest Payable Rs. 20,000/-

On the date of payment of interest (10th January of the next year) following accounting entry will need to be recorded in the subsequent year.

2)

Dr.Interest Payable Rs.20,000/-

Cr. Cash Rs.20,000/-

just opposite of in case if Accrual Income.

By Rajesh Kumar Nayak

We thank our readers for sharing these. They are correct in their articulation…. This is what we have explained… Next post, I will cover, how these become a back office process for outsourcing….

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