How to book month-end accruals correctly
Accruals match expenses to the period they belong to, even when the bill has not arrived. Here is what to accrue, how to estimate it, and how to reverse it.
Why accruals exist
Accrual accounting records expenses in the period they are incurred, not the period the invoice happens to land. If you used a service in March but the bill arrives in April, an accrual puts the cost in March where it belongs. Skip it and March looks artificially profitable while April carries a cost that was not really an April event.
What to accrue each month
| Accrual | Why |
|---|---|
| Unbilled vendor services | Work delivered before the invoice arrives |
| Payroll and bonuses | Days worked in the period but paid next period |
| Interest | Interest accrued on debt but not yet paid |
| Utilities and usage | Consumed in the period, billed in arrears |
| Commissions | Earned on the period sales, paid later |
The accrual process
- 1List recurring accruals so the same items get considered every month.
- 2Estimate each amount from contracts, timesheets, or prior actuals.
- 3Book the accrual as an expense and an accrued liability.
- 4Set the entry to reverse next period so it does not double-count when the bill posts.
- 5True up when the actual invoice arrives if it differs materially from the estimate.
How Fintra automates accruals
- Recurring accruals post ahead of period-end as part of pre-close, so the close starts further along.
- AI accounting suggests accrual amounts from prior actuals and open commitments.
- Reversing entries are handled automatically so accruals do not linger or double-count.
- Each accrual carries an owner and sign-off on the close board for the audit trail.
Frequently asked questions
What is a month-end accrual?
It is a journal entry that records an expense in the period it was incurred, even though the invoice has not arrived. You debit the expense and credit an accrued-liability account, then reverse it next period when the actual bill posts, so the cost lands in the right month without being counted twice.
What should I accrue at month-end?
Anything consumed in the period but not yet billed: unbilled vendor work, payroll and bonuses for days worked, interest, utilities billed in arrears, and commissions earned but not paid. Keeping a standing list of recurring accruals ensures the same items are considered every close.
What is a reversing entry?
It is an entry that automatically reverses an accrual at the start of the next period. It prevents double-counting: the accrual puts the expense in the current month, and the reversal clears it so that when the real invoice posts next month, the cost is not recorded twice.
How accurate do accrual estimates need to be?
Close enough to give a fair view of the period - accruals are estimates by nature. Base them on contracts, timesheets, or prior actuals, and true up when the real invoice differs materially. The goal is matching costs to the right period, not predicting the invoice to the penny.
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