USA Accruing Expenses @ Year End

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Hi,

I'm a little puzzled about accruing an expense in Dec only to have your accrual go to RE and not be on your ledger anymore in January. Your December accrual will credit your expense account in January, and if the invoice gets paid it will debit, only to produce a zero effect. What piece of this puzzle am I missing????

Thanks!
 

Counterofbeans

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It sounds like you are referring to a reversing JE. The whole point of a reversing JE is to simply put the expense into the correct period, but keep your AP department from not having to worry about cut-off at period end. Ideally, you want them to mechanically continue doing the same steps they always do.

In other words, you want the "technical," accrual part of your G/L to rest with appropriate accounting personnel, NOT the AP department (with some exceptions, of course). As such, when you receive an invoice that relates to a prior period, but received in a subsequent period, you'd book a reversing JE, which likely Dr Expense, Cr. Accrued Liab. When it reverses in the subsequent period, you have a Cr in that expense account. This, however, gets offset by AP when they Dr expense and Cr AP by entering it into the AP system.

As such, yes, you want a zero impact in January, as the expense relates to a previous period. Your December income statement, however, has the expense correctly recorded in it
 
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But let's say you need to reaccrue December in January because it has not yet been paid. Your accrual will be offset and have a zero effect, but shouldn't it increase your expenses since it has yet to be paid?
 
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Oh...the expense was already realized in December so no need to account for it again.
 

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