[ranganadh]

Dear friends,

Please share with me about Accurals.

1.What is accurals
2. for account receivables what entries will post
3. what is useful of this

Regards
Ranganadh

[morgaine300]

I'm not sure if this is a homework question you were assigned or not. If so, you really should be making an attempt to answer it on your own and we can let you know how you're doing. But I'm not quite sure it is, so I'll give it the benefit of the doubt. (Of course, if it's homework and you just copy me, your instructor will know. So hopefully the result will be an understanding of it.)

An accrual is when the "economic event" has taken place but no cash has exchanged hands yet. That is, you have earned revenue by doing a service or selling something, but your customer/client has not paid you yet. Or, you have incurred an expense -- someone else has done a service for you or provided you something, but you haven't paid them yet. Notice the earnings or expense comes first, but no cash has happened yet. Accruals are due to a timing difference between revenue/expense and the payment, with the payment always coming later. Meaning these involve receivables and payables. (Those accounts represent payments that will be later.)

As for #2 - if this was homework, you haven't copied this accurately, because that question can't be answered. If you're just asking, then you're confused. First, vocabulary. Posting is taking a journal entry and copying those numbers over to the individual ledger accounts that were used in that entry. If I take your question literally, ALL entries post. But I don't think that's what you meant. And I'm not sure what you actually do mean, because there isn't an ONE account receivable entry. An entry is a whole transaction that involves at least two accounts and there are several types of transactions that may involve account receivable. Yes, it is involved in some accruals. I can tell you it increases with a debit and decreases with a credit. I can tell you it's used whenever a customer owes you money and hasn't paid it yet, and it's also used when a customer pays you later for something they owed. But it can be used in other situations. (Like they return something or they replace it with a note or other things.)

#3 - useful about what? About accruals or about accounts receivable? Accruals follow the matching concept that says record revenues when earned and match expenses incurred in the same period. That is also based on the accrued basis which says revenues are recorded when earned and expenses when incurred. We do accruals to follow these concepts - that's their use.