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Under Accruals you recognize and account for the expense at the time it is incurred.
Under accrual basis we recognize the expenses, when it is incurred / happened for the financial year. It does not consider when it is paid. Example: $500 rent for month of December2013 is paid in January2014. If the financial year ends on December, then this rent expenses will recognize / record in2013 and not in year2014. The entry in December2013 will be: debit Rent expenses A/c and credit Rent Payable A/c for $500.
When it occors, when the expense is due i.e. for which period or at what point of time the expense has become due, thats the time when we are suppose to recognise / record for the expense, irrevalant of the payment.
Under the accrual basis of accounting, expenses are matched with the related revenues and/or are reported when the expense occurs, not when the cash is paid.
As soon as they occured.they are recorded in the books
When it is accrued, incurred or due
Under accural basis we recognize expenses when it actaully happens or occured.
Under the accrual basis accounting, revenues and expenses are recognized as follows:
Revenue recognition: Revenue is recognized when both of the following conditions are met: a. Revenue is earned. b. Revenue is realized or realizable.
Revenue is earned when products are delivered or services are provided.Realized means cash is received.Realizable means it is reasonable to expect that cash will be received in the future. Expense recognition: Expense is recognized in the period in which related revenue is recognized (Matching Principle).