USA Accruing expenses

[Kesha]

Is there a need to accrue expenses across fiscal years.

Example:

Energy bill has 6 days that are in one fiscal year(20) and 24 that are in another fiscal year(21). The bill has been paid in FY21 so we take 6 days worth of the bill and do a journal entry to put it back into FY20.

 

[UncleSam]

If you want the technical answer then yes you should book it if you are preparing your books in accordance with the accrual message of accounting.

However, if you are looking at it from a practical standpoint I always look at the amount and periods associated with it. In your example 24 days out of 30 were in FY21 so therefore from a practical standpoint unless the utility bill is very large I do not see it as material. When I worked as an auditor for rental properties not properly booking utility bills was a common mistake but if the amounts and periords were below what we considered "materiality" we did not care and just let it go.`

 

[Kesha]

If you want the technical answer then yes you should book it if you are preparing your books in accordance with the accrual message of accounting.

However, if you are looking at it from a practical standpoint I always look at the amount and periods associated with it. In your example 24 days out of 30 were in FY21 so therefore from a practical standpoint unless the utility bill is very large I do not see it as material. When I worked as an auditor for rental properties not properly booking utility bills was a common mistake but if the amounts and periords were below what we considered "materiality" we did not care and just let it go.`

Thank you, that was my thought as well. We have over 50 accounts per utility company and some of our bills range from 10.00 to 150,000. I was under the premise that the ones under 100.00 or so were not material. However, the larger ones were and that is where we need to focus.