intro - charity, there has been received grant of 6k for next financial year however it is posted as income when it's been received:
Dr 1200 Bank 6,000.00
Cr 4100 Grant 6,000.00
... year's end process, I receive email from auditors with info to post following:
Dr 4100 Grants 6,000.00
Cr 2109 Accruals 6,000.00
I just can't get my head round it.... Debit entry for 4100 will balance out income that I get. Why Accruals in Credit? I was told to use another account if I prefer 'Deferred Income'...
The grant is an accrued liability in that until the conditions of receipt are met you have no right to recognise it as either income or as an asset.
Next year when you may legitimately receive it it ceases to be a liability at which time you would
Dr Accruals
Cr whatever the grant was originally given for which may / or may not be income.
Deferred Income is just an accrual account by any other name.
HTH,
Shaun.
__________________
Shaun
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