How to record and reverse accruals

Record an accrual

1. Post the monthly accrual journal. Record an expense for each month covered by the accrual. Credit the accruals balance sheet account.
2. Reverse the accrual. At the end of the accrual period, reverse the accumulated amount to clear the accruals account.
3. Record the vendor bill or other payment. Record the transaction when you receive the invoice or make the payment.

Post the monthly accrual journal

This example uses a $300 quarterly electricity charge. You accrue $100 each month for three months.

1. Go to Adjustments, Journals, then New Journal.
2. In Date, enter the journal date, such as the last day of the month.
3. In Reference, enter a reference, such as Electricity accrual.
4. In Description, enter a description if required.
5. Enter the journal details:
   

   Ledger Account	Details	Debit	Credit
   Utility Expense (6400)	January electricity bill	$100
   Accruals (2101)	January electricity bill		$100

6. Click Save.

Repeat these steps for each month covered by the final invoice or payment.

Each journal debits the expense account, which appears on your profit and loss. The journal credits the accruals account on your balance sheet.

Reverse the accrual

At the end of the accrual period, reverse the total accrued amount.

1. Go to Adjustments, Journals, then New Journal.
2. In Date, enter the journal date, such as the last day of the accrual period.
3. In Reference, enter a reference, such as Accrual reversal.
4. In Description, enter a description if required.
5. Enter the reversal:
   

   Ledger Account	Details	Debit	Credit
   Accruals (2101)	Accrual reversal	$300
   Utility Expense (6400)	Electricity accrual reversal		$300

6. Click Save.

The reversal clears the accrued amount from the accruals account.

Record the vendor bill or other payment when you receive the invoice or make the payment. Record any difference from your estimate in the final month.

Record payments on account and deposits