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Hi John,
I was wondering how would I Account for a wrong guess in accruals.
For example if I had to do accounts and had to guess that a bill was 5000 but it turned out the invoice was different, lets say 5500 and arrived in very late after the closing period.
How would you account for that Expense wise and accrual wise to balance the accounts or make them right.
Lee
We can not go back and change last years figures. So we do the normal entries for the current year, have our best estimate of the accrual at the end of the current year. The expense for the current year will include (using your figure) the extra $500.
I do actually show this (with an example) in my free lectures on accruals. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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