Accrual entry practical application

Dr Accruals 2,000
Cr exp a/c 2,000
Being reversal of pervious accual

Dr exp a/c 3,300
Cr Creditors 3,300
Being input of actual invoice

Dr exp a/c 3,300
Cr Bank 3,300
Being pmt of actual invoice

So for expense accruals the transaction posting format is this:

Let’s assume that you calculate, based on a previous invoice, that the expense accrual to the period or year end is 2,000.

Date: at the period or year end. [e.g. 31 December 2012]
Dr exp a/c 2,000
Cr Accruals 2,000
Being set up of an accrual (i.e. an estimate of what you think actual expenses will be up to the period or year end, when you don’t know because you’ve haven’t received the actual invoice for the expense yet.)

Date: at the START of the NEXT period or year. [e.g. 1 January 2013]
Dr Accruals 2,000
Cr exp a/c 2,000
Being reversal of previous accrual (all accruals are reversed at the start of the next period or year.)

Date: when you actually receive the invoice [e.g. 20 January 2013], showing the expense charge, up to the end of the previous period or year end [e.g. to 31 December 2012].
Dr exp a/c 3,300
Cr Creditors 3,300
Being input of actual invoice

Date: when you actually pay the invoice off [e.g. 25 January 2013]
Dr Creditors 3,300
Cr Bank 3,300
Being payment of actual invoice

So from the above, we can see that we made an accrual for the expense covering a period from the last invoice we have, up to the period or year end. [e.g. 31 December 2012] of 2,000.

When the actual invoice came in for that period it was 3300. So, we under accrued in the previous period or year end [e.g. to 31 December 2012] But we will make up the difference 3300 –
2,000 = 1,300 in the next period [e.g. starting 25 January 2013]

2,000 Accrued for in period or year end [e.g. to 31 December 2012]
1,300 posted in the next period [e.g. starting 25 January 2013] being the make up of under accrued amount in period or year end [e.g. to 31 December 2012]