Accrual—accrual-basis
recognition precedes cash receipt and expenditure
(1)
Revenue—recognition of revenue earned, but not received
(2) Expense—recognition
of expense incurred, but not paid
Accounting Example :
Expense Accruals
Wages expense Account Dr xx
To Wages payable Account xx
Revenue Accruals
Interest receivable Account Dr xx
To Interest revenue Account xx
Reversal Yes
Entries
are reversed for accounting practicality. If accruals are reversed, the
subsequent cash transaction is reflected in the associated nominal account. If
accruals are not reversed, the subsequent cash transaction must be apportioned
between a nominal and real account.
Cash Account Dr (amount received)
To Revenue (earned in current period)
To Revenue receivable (accrual at last year-end)
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