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help with accrual and prepayment journals - Part 1

Hi all,

In my new role I am booking accruals and prepayment journals for the first time, although I know what they are in theory I struggle to understand how they work in practise. We use Oracle system by the way.

Accrual journal:
If I receive an invoice in the current month for something I accrued the previous month I need to delete that entry from the journal as we don't need to accrue for it anymore. However my doubt is do we need to pay that invoice in order to cancel the accrual from the journal? Or we simply need to book it in oracle? Or again, it is enough to know that we received it even though we dont have paid it nor booked in oracle?

I am asking this because after closing AP period for current month when I was doing the accrual journal i noticed that one of the entries referred to an invoice that I received but which i didn't pay or entered in Oracle and I wondered whether I should have left that amount in the journal also this current month or not.

What I think is that in order to delete the accrual from current month I would need to see it on oracle when I do account inquiry in oracle for current month. If that is not the case I would need to accrue for it again even if I receive an invoice for that amount because I didn't enter it into Oracle. Is this correct?

Thanks a lot

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

First terminology.

You only "delete" unposted journal entries, etc.
You REVERSE posted journal entries, invoices, etc.

If you accured an invoice that later comes in, you can post that invoice and in the body (line item) instead of "charging" the expense, you reverse the accrued expense account.

That is assuming you did this type of transaction first (lets say Telephone)

Telephone $100
Accrued expense $100

With the invoice, the effect will be

Accrued expense $100
Accounts Payable $100

The net effect is

Telephone $100
Accts Pay $100
Accrued Exp $0

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