Scroll Top

search-icon
    drop-arrow

    Accruals

    Introduction

    To understand accruals, one has to understand the meaning of the word accrual, which is "the act of accumulating something". Accruals relate primarily to prepayments and arrears.

    In accrual-based accounting, accruals refer to expenditures and revenues incurred or earned but not recorded in account books. Adjustment entries to report these at the end of an accounting period are incorporated in the financial statements.

    Understanding Accruals

    An accrued expense is an expense incurred, but currently not recorded in the account books. To reflect this in the financial statements, it will require an adjustment entry in the account books.

    Accrued income is revenue received but not actually reported in the account books. In this case, too, an adjustment entry will be required, similar to the accrued expenses. Some examples of accruals may include receivables, accounts payable, accrued rent, and so on.

    In the current accounting period, money owed by a company is to be accrued and will be added to the costs in the profit and loss account. In the current accounting period, money owed to a business must be accrued and should be added to the income in the profit and loss account.

    Example

    In double-entry bookkeeping, an accrued liability account is the offset to an accrued expense which appears in the balance sheet. The offset to accrued revenue is an accrued account of assets that appears on the balance sheet, too. Adjusting journal entry for accrual will, therefore, have an impact on both the balance sheet and the profit and loss account.

    For example, a company with a debenture will accrue interest expense on its monthly financials, although interest on debentures is typically paid semi-annually. The interest expense recorded through an adjusting journal entry will be the amount that was accrued as of the year-end date. A corresponding interest liability will be recorded in the balance sheet.

    Index

    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use

    ISO

    ISO 27001

    Data Center

    SSL

    SSL Certified Site

    128-bit encryption