Accruals & Deferrals

Accruals

An accrual is any expenditure before the closing key date that represents an expense for any period after this date. For example, RNB or Accrual bonus.

The transaction entires of accrual is

Month 1, 2, 3, …
Dr. Expense
   Cr. Accrual Bonus

Month 12
Dr. Accrual Bonus
   Cr. Cash

Deferrals

Deferred income is any receipts before the closing key date that represent revenue for any period after this date.

For example.. Our company lend interco some money. Interest will be occurred every month but we don’t get it until the last month of year. We have to record deferral every month.

The transaction entires of deferral is

Dr. Deferral Interest (AR)
   Cr. Revenue

At the last month
Dr. Cash
   Cr. Deferral Interest

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