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If a repair and maintenance service is perfomed in October and the bill from the vendor only comes in during December, should I record this expense in October or only in December when the bill is received ?
You should accrue the cost in October to recognise the expense when the cost is incurred, and offset this against the invoice once it is received in December
FYI, this is whats known as the ‘matching principle’, matching costs incurred against revenues received
Hi Carl29,
Thanks for the reply. One more question, if lets say I do not how much is the repair and maintenance cost until the bill comes in , how do I go about making the accrual in October ?
you can estimate it. As long as its not year end, if you’re estimation is way off it wont make much difference (although might affect your management accounts,might want to check with your boss), or you might have a quote. If it bridges a year end, you will need to provide details to your auditors, who may challenge the basis for your amount – it needs to be realistic
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