Accrued Expenses Explained (SIMPLE METHOD WITH ACCOUNTING ENTRIES)

Within this video I'll walk you through how to accrue for expenses within your accounts. This video forms part of the accruals concept of accounting which states goods or services are to matched with the period that they took place. It's also known as the matching concept.
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[@brodyy2k11]

Brill

[@qlecaterina3417]

Thanks, but what happens to our accounts if the invoice we receive shows a different amount( not the one we have expected)?

[@Willboardman]

So the accrued amount will be based on either the contracted figure which would be exact or an estimate in which case there is the possibility that the invoice will come in at a different amount. Now the accrual is entered in at the end of the period to ensure that your figures are correct at that point in time. At the start of the following period the accrual is reversed i.e it’s taken back out. If the invoice is then received within the period it would just be entered in as normal. If it isn’t then you would accrue the figure again at the end of the period, so each period the amount will be accrued and then reversed until the invoice is received. So it’s doesn’t matter if the invoice amount is different because you’d be entering it in at the point at the which the accrual had been reversed :).

[@Filippoaloisio]

@@Willboardman I found the question very interesting, but if I understood correctly, you are basically saying that if the invoice for the next period will be greater than the amount by which we have already written for in the accrued expense for the previous period, the excess expense will be part of the next period (i.e. the one we are actualy writing when we receive the invoice)... Is that correct? 🤔