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Answer Posted / chintan joshi
Accrual:
Accrual is one of the accounting concept. Expense or revenue
is booked as soon as they incur not when they are realized.
Accrual is also a provision of the cost.
Accrued Interest.
Best example which will clarify the concept from root.
Company A has taken a loan of Rs. 6,00,000 of which Rs.
60,000 interest is payable annually. Some book entry as follow.
on 31st March 2009.
Interest dr. 60,000
Bank cr. 60,000
Above practice is not accrual.
Following will explain why Accrual is called provision of
cost because?
Rs. 60,000 Interest will be reported in all 12 months
because amount of loan is utilized in all months. So per
month posting comes to 60,000/12 = 5,000.
On 1st April 2008.
Interest dr. 5,000
Accrued Interest cr.. 5,000
Same practice is followed upto March 2009. And when interest
is paid then accounting entry is like,
On March 2009.
Accrued Interest dr. Rs. 60,000
Bank cr. Rs. 60,000
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