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How to remove accruals from the balance sheet

Any one any ideas as to how i can remove accruals from the balance sheet for services rendered so they do not show as an expense in the current quarter and only show in the next quarter?? I've been toying with moving suppliers to Milestone payments against defined milestones, so the service is performed in quarter but no accrual recorded and then paid and expensed only when the mile stone is achieved in the next quarter. Anyone know if that will work?? .


Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

The financial statements may be wrong, misleading, and if the amount of the accrual is material it may result, or be thought of, as fraudulent.

Here's is something from the FASB:

I would think this is a contingent liability that should be recorded, especially if you are more likely than not to pay it out.

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

How are you recording the revenue? If you are recognizing over a period of time other than when a supplier's 'milestone' is reached, it is appropriate to record the expenses over time as well. Even if a contract/service agreement states no payment is due unless a milestone is reached, you could still be liable for some portion of the expense and accruing for it is the correct way to handle - unless there is something about your business that I don't understand.

Handling it the way you seem to be stating above is changing your record keeping from accrual based to cash based. I wouldn't go that route.

Samuel W Reed
Title: Cofounder and CTO
Company: BitMEX
LinkedIn Profile
(Cofounder and CTO , BitMEX) |

You have to follow the matching principle. Costs are accrued as incurred. You can't defer a cost to a future period if it is incurred in the current period.

If you are accruing a cost, you've already deferred a portion to the next period, and depending on the nature of the cost, have accounted for it correctly. An example would be prepaid rent. If you pay 6 months of rent up front, you would credit cash and debit the prepaid asset. As each month rolls by, you would credit the asset and debit your expense in the period incurred.

If you are referring to revenue recognition, expenses are still recognized in the period incurred, and revenue recognized only when you've substantially completed the project/milestone.

Just be careful about over-thinking the situation. In my experience, if accounting becomes fancy, it is generally wrong.


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