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Accruals guide A Brief Guide to ? Accruals Accounting November DRAFT v Cv - November Document briefguide accruals doc Accruals Accounting Accruals Accounting is about ensuring that all income and charges relating to a ?nancial period are actually recorded

A Brief Guide to ? Accruals Accounting November DRAFT v Cv - November Document briefguide accruals doc Accruals Accounting Accruals Accounting is about ensuring that all income and charges relating to a ?nancial period are actually recorded as being part of that period ?? and that assets and liabilities are appropriately disclosed This means amounts are recognised when they are incurred or when the right to receive them arrives ?? regardless of the actual date of any cash receipt or payment It also requires that ? non-cash ? transactions and events are recognised in the accounts to give ? the complete picture ? ?? this includes concepts such as depreciation and provisions - as covered in the table opposite Cash Accounting - An Alternative In terms of conveying a ? true and fair view ? there isn ? t really any alternative to accruals accounting Worldwide accounting standards are clear in that accruals accounting is ??part of the bedrock of accounting ? ??An entity shall prepare its ?nancial statements except for cash ow information using the accrual basis of accounting ? International Accounting Standards IAS s Financial Reporting Standards FRS s The old approach of ? Cash Accounting ? shows just cash receipts and cash payments when they occur There are no adjustments made to re ect amounts owed or owing ?? or the ownership and use of assets Whilst this has simplicity to o ?er it does not provide the complete picture and is only appropriate today for the very smallest of organisations ?? typically very small-scale voluntary groups with low levels of stakeholder interest The Cash Flow Statement With Accruals Accounting comes the need for a Cash Flow Statement which takes equal importance alongside the income statement and balance sheet in the accounts This is necessary because a focus on cash remains an important measure of business health and operation A brief guide to ? Accruals Accounting Page Cv - November Document briefguide accruals doc To achieve this the Cash Flow Statement follows a standard format to show cash ows during the period analysing them between operating investing and ?nancing activities ?? and providing a reconciliation of the change in cash balances during the period to the di ?erence between income and expenditure in the income statement Fundamental Concepts Accruals Accounting brings with it the need to consider and include Accrued Expenses Creditors Debtors Depreciation Prepayments Provisions Anticipation of future payment requests whereby you have received goods or services ?? but have not yet been charged for them These show as the type of expense they are e g Electricity on the Income Statement and as an ? Accrued Expense ? Liability on the Balance Sheet A Balance Sheet liability showing amounts you owe for goods and services received that have been invoiced but not yet paid A Balance Sheet asset showing amounts owed to you for goods and services delivered but not yet been paid for Assets don ? t last forever Depreciation is a prudent estimate