Why are accruals needed every month?

Reasons for Monthly Accruals

Accrual adjusting entries are needed monthly only if a company issues monthly financial statements.

Two reasons for the monthly accrual adjusting entries are:

  • To report the revenues and the related receivables which were earned during the month, but the transactions had not been recorded in the accounts as of the end of the month
  • To record the expenses, losses, and their related liabilities which were incurred during the month, but the transactions had not been recorded in the accounts as of the end of the month

Monthly accruals and deferrals and other adjusting entries must be recorded prior to issuing monthly financial statements in order to comply with the accrual basis of accounting.

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