Accruals
An accrued expense is an expense incurred in the reporting period but not yet paid by the reporting date. Recognise the expense in the period in which the service is received and a liability for the unpaid amount. Depending on whether an invoice has been received and entered, it may be recorded as a trade payable or as an accrued expense. A year-end accrual adjustment normally debits expense and credits an accrual liability.
Worked example
Electricity used in December is estimated at $300 and billed in January: recognise $300 expense and $300 liability at December year end.
Common mistake
An accrual is an unpaid expense, whereas a prepayment is a payment for benefits belonging to a later period.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Accrued expenses, Accrued expense