accruals in accoutancy

Reverse what was initially booked and re-book for the correct amount. At least this is what is done for most accounting purposes.

As most expenses are normally estimated and it is required for most accounting purpose to accrue (rather than book when paid) expense, this is quite common. Is it a large or material difference? Did this cross over a fiscal year end? These are other items you need to check. It is kind of difficult to provide more information as I am unsure what sort of accounting policy you follow. Is it GAAP? For what type of business?

Hi Linkat

knew to this lark - is it possible to discuss this with you on the phone - yes difference is quite material.

I have a TB which has 3 lots of accountancy accrual totalling £8250 when actual invoices pertaining to these accruals add up to £7050 - additionally at the time the TB was prepared two of the accruals had already converted into invoices.

Don't really understand accountant's thinking on this one but want to be sure i know how to correct it before i ring them up.

Sorry, but I am in the US and our accounting rules could be different. Also, I am not an expert as I work in the mutual fund realm and the accounting may be different - I would hate to mislead you.

But from a high level viewpoint - we would simply reverse the initial entry and then rebook for the correct entry. From a US standpoint, the big issue I see here is if this crosses a fiscal year end (maybe quarterly too - I know in the US small businesses often times pay estimated taxes quarterly) - would taxes be impacted and how?

I would suggest finding some one familar UK accounting policies to make sure you record it correctly and take into consideration any other factors. Does the business have a public accountant that helps with filing taxes or similar things? They should be able to guide you.

Thanks for this - told you I was new!
Have resorted to old fashioned 'T' accounts and resolved it as you suggest so many thanks for your help.

I've done that before! Glad that you were able to resolve it.

Linkat, that is exactly what I would have done. Mostly, I did that kind of thing when a large invoice was short paid by a few dollars. Technically, it calls for a correcting entry (US practice) at the time the discrepency was discovered, but I was willing to deviate from accepted practice when it minimized confusion. If the dollar amount is significant, the practice can skew earlier interim financial statements. There are probably some very conservative accounting programs that won't even permit entries in a prior period.

Let me add that if the error occured in a prior year, and was part of the basis for an annual tax return, I would tough it out and go with a correcting entry.