{"id":1805,"date":"2023-08-15T15:58:23","date_gmt":"2023-08-15T12:58:23","guid":{"rendered":"https:\/\/akaunting.com\/hc\/?post_type=glossary&#038;p=1805"},"modified":"2024-08-29T12:24:09","modified_gmt":"2024-08-29T09:24:09","slug":"accruals","status":"publish","type":"glossary","link":"https:\/\/akaunting.com\/hc\/terms\/accruals\/","title":{"rendered":"Accruals"},"content":{"rendered":"\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What are Accruals?<\/strong><\/h2>\n\n\n\n<p class=\"entry-paragraph\">Accruals are adjustments that must be made before a company&#8217;s financial statements are issued to reflect the revenues earned or expenses incurred that have not yet been recorded in the company&#8217;s books.<\/p>\n\n\n\n<p class=\"entry-paragraph\">Accruals are based on the accrual method of accounting, which recognizes revenues and expenses when they are earned or incurred, regardless of when cash is received or paid.<\/p>\n\n\n\n<p class=\"entry-paragraph\">It involves the following types of business transactions:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"entry-paragraph\"><strong class=\"entry-subtitle\">Accrued revenues<\/strong>: These are earnings obtained from providing goods or services to clients which have not been invoiced or received yet. A consulting company that finishes a project for a customer in December, but bills them in January, would record an accrued revenue in December.<\/li>\n\n\n\n<li class=\"entry-paragraph\"><strong class=\"entry-subtitle\">Accrued expenses<\/strong>: These are expenses that have been incurred by using goods or services from suppliers but have not yet been paid or recorded. For example, a company that uses electricity in December, but does not receive the bill until January, would record an accrued expense in December.<\/li>\n\n\n\n<li class=\"entry-paragraph\"><strong class=\"entry-subtitle\">Deferred revenues<\/strong>: These are revenues that have been received in advance from customers but have not yet been earned by providing goods or services. For example, a magazine publisher that receives a subscription fee in December for a one-year subscription starting in January would record a deferred revenue in December.<\/li>\n\n\n\n<li class=\"entry-paragraph\"><strong class=\"entry-subtitle\">Deferred expenses<\/strong>: These are payments made in advance for future goods or services. An instance is when a company pays rent in December for January&#8217;s use, resulting in the recording of a deferred expense in December.<\/li>\n<\/ul>\n\n\n\n<p class=\"has-text-align-center has-text-color has-link-color wp-elements-353085e8948bb5134329763d0f509c26\" style=\"color:#6ea152\"><a href=\"https:\/\/akaunting.com\/accounting-software\">Free Accounting Software for Small Businesses<\/a><\/p>\n\n\n\n<p class=\"entry-paragraph\">Accruals are important because they ensure that the company&#8217;s financial statements accurately reflect its true financial performance and position, even if cash has not yet changed hands.<\/p>\n\n\n\n<p class=\"entry-paragraph\">Accruals also help to match revenues and expenses to the periods in which they occur, which is required by generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS).<\/p>\n\n\n<\/div>\n\n\n<p><\/p>\n","protected":false},"menu_order":0,"template":"","letter":[19],"class_list":["post-1805","glossary","type-glossary","status-publish","hentry","letter-a"],"acf":[],"_links":{"self":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary\/1805","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/types\/glossary"}],"version-history":[{"count":7,"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary\/1805\/revisions"}],"predecessor-version":[{"id":2899,"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary\/1805\/revisions\/2899"}],"wp:attachment":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/media?parent=1805"}],"wp:term":[{"taxonomy":"letter","embeddable":true,"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/letter?post=1805"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}