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General Accounting Discussions: Accrual Entries

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  1.  
    • CommentAuthorstudent50
    • CommentTimeJul 27th 2007
     
    Can someone explain to me how to do accrual entries. What is the main principle.
    Thanks.
    • CommentAuthorjoberstadt
    • CommentTimeJul 28th 2007
     
    Here's a quick definition: Income or expense that has been earned or incurred, despite cash not having been received or paid out. Let's say you must pay for 2 months rent prior to moving into an office. This must be booked as Prepaid Rent (a current asset) in month 0. Then you would accrue rent expense in month 1 and again in month 2, with a credit to Prepaid Rent.
    Thankful People: student50
    • CommentAuthorCounter
    • CommentTimeAug 1st 2007
     
    Accrual adjusting entries involve a balance sheet account and an income statement account. They are used to record an expense that has been incurred by a company, but not yet entered into the accounts. For example, if a company has run an advertisement on July 31, but has not yet gotten the bill by the time the July financial statements are prepared, the accountant should prepare an accrual adjusting entry that debits Advertising Expense (the income statement account) and credits the balance sheet account Accounts Payable or Accrued Expenses Payable. The main principle is the matching principle. The entry gets both the income statement and the balance sheet records up-to-date on an accrual basis as of July 31.

    Accrual adjusting entries also involve revenues. If the firm has earned $1,000 as of July 31 but has not yet recorded the transaction, the accountant should prepare an accrual adjusting entry to debit a balance sheet asset account such as Accounts Receivable and to credit an income statement account such as Service Revenues.

    AccountingCoach.com has an explanation of adjusting entries under the tab "Topics Explained."
    Thankful People: student50
  4.  
    Accrual entries made your work easy and smooth and these accountants checks on at the end of the month!

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