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Accruals Accounting

Nitin Saraswat
24/07/2020 0 0

Accruals in Accounting are the expenses or revenues that have been recorded by the firm but not yet realised. In simple terms, they are the financial transactions already estimated in the current accounting cycle and payment for which is done in the future.

Let’s look at a few practical accrual accounting examples.

Example 1: Salaries Payable

On 31 December 2020 salary for December amounting, Rs 20,000 to be paid in January 2021 shall be recorded as under. Salary account shall be debited (accounting rule: debit all expenses), while salary payable account will be credited (Liability created).

31/12/2020 Salary Expense A/c Dr. 20,000  
  Salary Payable A/c Cr.   20,000

 

Example 2: Rent Receivable

On 31 December 2020 rent for December amounting Rs 20,000 to be collected in January 2021 shall be recorded as under. Rent Receivable account shall be debited (Asset created: to be received), while Rent Income account will be credited (accounting rule: all income and gains should be credited).

31/12/2020 Rent Receivable A/c Dr. 20,000  
  Rent Income A/c Cr.   20,000

 

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