Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

Accrual - Concept

Srinivasan Santhanam (Acn) (36 Points)

18 October 2007

Dear all,

In the contest of Revenue Accrual,

Accrual means recognising revenue for which invoice not raised.

Does the amount of revenue that was not recognised in the earlier period but recongnised now will form part of ACCRUALS.

Reply
Follow
Share

7 Replies

Prakash Popat (3134 Points)
Replied 18 October 2007

Yes Accural means services/products rendered/delivered and your entitlements of payments dues but not billed,nor received. Accordingly in past Your entitlements dues but not billed You can take as Prior periods Items if It is materially affects the state of affairs.

Upgrade to CAclubindia Pro. Subscribe Now!

Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 18 October 2007

on the delivery of service or goods genrally your right to receive payment accrues , irrespective of the raising of bill. Suppose you do not raise bill , does it mean that your right to receive has not arises . Raising of bill is nothing but intimation of the right to receive . Under accrual system of accounting , the entries are to be passed on accrual basis and not on bill raise basis . If in the last year , some right had accrued , but you have not issued bill nor you had passed any entry. In the current year , it will be prior period item . HOWEVER NOTE THAT YOUR RIGHT TO RECEIVE IS ALSO DETERMINED BY YOUR AGREEMENT .

ravi sankar (Chartered Accountant) (157 Points)
Replied 18 October 2007

Another important criteria for recognizing revenue-in is "the resonability with which the revenue can be recovered.

hitesh (student) (17 Points)
Replied 19 October 2007

In my opinion Accrual Concept means recognising the expenses as and when they r incurred. it is etabliehment of Right to Receive but not Right to Claim. For e.g: If you r using the rented premises and rent of the month is payable in the following month then rent of that month is accrued for that month but will become due in the in following month.