I am new to accruals and would like to ask you for help.
Do we calculate accruals for a given year before or after this year ends?
Let's say that your period is 1 June 20X8 to 31 May 20X9
You have already paid for electricity for ten months. You have already used electricity in last two months but invoice that covers those last two months will arrive in August 20X9.
When do you calculate accruals? Before 31 May 20X9 or after 31 May 20X9?
-- Edited by rafapak on Sunday 15th of March 2015 11:14:22 PM
-- Edited by rafapak on Sunday 15th of March 2015 11:16:21 PM
If this is your first year, and you have used electricity during April and May 20x9, which will not be billed until after the year end, you would make an adjustment for a 2 months accrual on 31 May - so that the closing accrual appears as part of the year end "light and heat" figure.
If you were using a bookkeeping software, you would date the journal 31 May.
Let's say that prices changed and for the eleventh and the twelfth months they are different when compared to electricity prices for the first ten months. You used energy for the last two months of the period but still don't know new prices. Do you still have to calculate accruals in case like this? If yes, how?
I am asking because when somebody starts doing some kind of service for you and invoice will arrive later it is difficult to determine now what is the value of service. Do you have to make some kind of ' assumptions' in relation to invoice value?
-- Edited by rafapak on Tuesday 17th of March 2015 05:53:51 PM
I hope I won't be considered as butting in but it's got to be best guesstimate. Best to over estimate slightly than under. If your year end is may but you're not prepping year end accounts until sept than you can use exact figures to accrue as at the end of May. Hope that helps
Generally, by the time you come to do the accruals, you may have already had the following quarter's bill, and you would use 2/3 of that, as an accrual. As Beste says, it just a best guess. You could also take the last few bills and work out an average month. You could use days instead of months. There's no set way.
