Accrued Expenses
Also called: Expenses Payable, Outstanding Expenses
Costs you have used but not yet been billed for, such as this month's electricity or audit fee, on the Balance Sheet.
In detail
An accrual records a cost that belongs to the period even though the supplier has not yet sent a bill: the auditor's fee for the year just closed, electricity used in Ashadh but billed in Shrawan, or interest due on a loan. The Journal Entry debits the expense and credits Accrued Expenses, so the Profit and Loss carries the full cost of the period and the Balance Sheet shows the amount owed. When the actual bill arrives, a Purchase Invoice is posted in the normal way and a reversing entry clears the accrual so the cost is not counted twice. Without accruals the year-end profit is overstated and the tax computation starts from the wrong figure.
Formula
Accrued Expenses balance = Costs incurred and not yet billed; cleared when the bill is posted
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Professional Fees | Rs 50,000 | |
| Accrued Expenses | Rs 50,000 |
How to record it in BRAccount
- 01Go to Invoicing > Journal Entry > New dated the last day of the period.
- 02Debit the expense account, such as Professional Fees, and credit Accrued Expenses.
- 03Submit. The entry below posts.
- 04When the supplier's bill arrives, post it as a Purchase Invoice to the same expense account.
- 05Post a reversing Journal Entry: Dr Accrued Expenses, Cr the expense account, so the cost is not doubled.
- 06Review the balance each month on Financial Reports > General Ledger.
When to use it
Post by Journal Entry at month end for expenses with no invoice yet. Reverse when the actual Purchase Invoice arrives.
Example from the demo books
Dr Professional Fees Rs 50,000, Cr Accrued Expenses Rs 50,000 for the audit fee of FY 2083-84 not yet billed at Ashadh end.