India Accruals

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1.Generally Accruals are auto reversed in the subsequent months. But during Yearend alone, accruals are made in Standard mode and not in reversal mode. Why?


2.Also, If the expenses are very less than the accruals, how that excess accruals would be treated during year end?


3.What if, Accrual not made in the month, how the profit/loss statement would be ?
 

RLM

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1. As per my understanding, accruals are either auto reversed immediately or reversed after a certain period after an event is lapsed.
2. If expense is less than particular accrual, then it will be manager's discretion to either hold or release excess. Usually finance managers check with business area/department managers to see what they think (budget figures are also taken into account for analyzing the excess accrual)
3. There will be huge spikes in P&L and many companies try to avoid this. So, finance managers usually glance trial balance general ledger balances before closing books for the month.

Hope this helps.
 

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