UK Offsetting under accrual in operating costs with over accrual in accrued income

[Ryan Parrish]

Hi,

Couple of questions. I have over accrued (accrued income) total gross revenue by 3.02%. Consequently the services provided were a lot less than anticipated.

Would there be any implications of on offsetting an over accrual balance in operating costs against some of the over accrual (accrued income) in gross revenue? At the bottom line the net affect would be the same?

Alternately can over accrued income be spread over several periods if the value was cleared out before year end?

Thanks

 

[kirby]

Your books are to be accurate. So, as you know of an overaccrual it needs to be adjusted now, and not over time.
"Spreading out" the correction over the year negatively affects anyone who uses a financial statement before the error is fully corrected.

 

[Fidget]

Just to add to the above... in both instances you'd be dabbling in creative accounting! Offsetting is only allowed under certain circumstances and covering up a cock-up is not one of them.

Similarly, spreading it out by the year end (this DOES go on by the way!) is not good either. It might pass by the eye of the auditors at year end, but up to then the internal financial statements used by management will be distorted. These statements are used internally to give a snapshot of where a business is currently at, and whether or not to keep or adjust the plans, budgets & forecasts. If there's dodgy numbers in there being relied upon by decision makers, then you can see how things could go very wrong.

But I like your thinking. I've been down these roads as well.