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• # 80624
• Thu 08 Mar 2012 02:48 PM

I am currently studying accruals and prepayments, getting confused as usual and making a bigger deal out of them than necessary!  I understand what they are and how you do the double entry but I don't understand how in real life scenarios bookkeepers manage these.  In terms of is there a seperate list that the bookkeeper maintains so that they know there will be an accrual on a certain account which will need to be adjusted at year end.  Not having the practical experience is making it hard for me to imagine the procedure followed.

 Also, for some bills if we are estimating and the amount comes in more or less than the estimate how is this handled. Thanks for your help!

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• # 80637
• Thu 08 Mar 2012 10:12 PM

I used to deal with accruals and prepayments quite a lot in a previous job so will try and help.

The computer system we used would create an automatic accrual after you had put through a goods receipt against the purchase order.  There were times when I would do manual accruals, I kept a list of all open orders and if they had been delivered and no invoice had come in then I would accrue it at the month end.
Likewise on prepayments I would keep a big spreadsheet of everything that was spread over more than one month and go through it at month end for the journals.
At the beginning of each month the accruals or prepayments were reversed off completely, when the actual bill came through if it was more or less that difference would show on the following month.  Unfortunately you can never be 100% accurate with all accruals/prepayments.

Hope this helps.

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• # 80646
• Thu 08 Mar 2012 11:31 PM

Hi Shazans

I usually keep a detailed breakdown of the prepayments and accruals on a excel sheet which I reconcile to the account balance.

The sheet also details when to release prepayments and accurals into the P&L where possible.

Kind regards
Stuart       

• Forum Moderator, South East & Greater London Regional Chairman
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• # 80670
• Fri 09 Mar 2012 01:15 PM

Thank you for your replies, thats helpful to know

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