Why accrue an expense before the invoice arrives?

Under accrual accounting, a cost belongs in the period when the goods or services are received. Waiting for the invoice can understate both that month's expense and its liabilities. Support the estimate with service dates, usage, approved hours, or a contract.

Does every accrual need a reversing entry?

No. A reversing entry is a workflow choice. Some liabilities remain until they are settled or adjusted directly. For an accrual that reverses, document the reversal date and how the invoice will be booked so the same cost does not remain in expense twice.

What if the bill arrives two months later?

Track the original service period and reassess the outstanding obligation at each close. If the first reversal removed the liability and the bill remains unrecorded, re-accrue the supported amount. Do not add that amount on top of an accrual that is still on the ledger.

Can I copy recurring accruals from last month?

Use last month as a starting list, then refresh the estimate and check whether the bill has already been entered. Utilities, payroll, and contractor services change. A recurring template needs current service dates, support, and review, not just a repeated dollar amount.

What causes the classic accrual double count?

The accrual remains in expense and the invoice is also posted to expense for the same service. Check the scheduled reversal actually posted. If the liability is being cleared directly instead, ensure the invoice clears that liability rather than recording the full expense again.

How are accrued expenses different from accounts payable?

Accounts payable generally holds entered vendor bills. An expense accrual covers a received cost whose bill is not yet recorded. Search the payable ledger before accruing so an entered bill is not also included as an unbilled estimate.

Guide

Accrued expenses and reversing entries at month end

By the Vanward team · Last updated October 23, 2026

A month-end expense accrual records a cost for goods or services already received when the bill has not yet been entered. Debit the relevant expense and credit accrued liabilities using a supported estimate. If the accrual is set to auto-reverse, the first day of the next month debits accrued liabilities and credits the same expense. Enter the eventual bill normally, then compare it with the estimate. Review unpaid items again at the next close because a reversal alone does not settle an obligation. Keep a schedule of vendor, service period, estimate, reversal, and invoice references, and tie its outstanding total to the accrued liability accounts in the general ledger.

Find the expense that belongs to the month

An invoice date is not a service date. A bill dated July 8 for June work belongs in the June expense assessment. During the close, review bills received after month end, open purchase orders with confirmed receipt, contractor hours, and department confirmations. Check the service period and whether the cost is already recorded before creating an accrual.

Source	What to look for	Useful support
Subsequent bills	Prior-month services on invoices dated after month end	Invoice service dates and confirmation of delivery
Utilities	Consumption after the last billed service date	Usage, rates, or a recent bill adjusted for current activity
Payroll	Earned wages not yet recorded through month end	Payroll calendar, earned days, and employer payroll taxes and benefits
Contractors	Completed work that has not been invoiced	Approved hours, milestones, and agreed rates

Accrue only the unrecorded portion. For payroll, do not accrue a full pay period if part is already posted. Separate confirmed estimates from unresolved questions and assign someone to resolve each question before review. A budget alone does not establish that a service was received.

A worked accrual and reversing journal entry

Fictional Juniper Deskworks estimates $3,000 for June electricity from usage and the contract rate. The bill has not arrived by the June close. It records the accrual on June 30 and sets an auto-reversal for July 1 using the same expense account and dimensions.

Date	Account	Debit	Credit
June 30: accrue June service	Utilities expense	$3,000
June 30: accrue June service	Accrued utilities		$3,000
July 1: auto-reverse	Accrued utilities	$3,000
July 1: auto-reverse	Utilities expense		$3,000
July 20: enter June bill	Utilities expense	$3,180
July 20: enter June bill	Accounts payable		$3,180

June carries $3,000 of expense and liability. In July, the reversal and bill net to $180 of expense for the estimate difference, before any July service is recorded. Paying the bill later debits accounts payable and credits cash. It does not create another utility expense.

If the bill arrives while June is still open, use it: update the June accrual and its reversal to $3,180. If June is already closed, the $180 normally lands in July as a true-up of a reasonable estimate. Treat it as a prior-period correction only when it reflects a mistake, such as a bill that was in hand at the June close and missed, and then follow the company's policy for correcting errors.

When the bill arrives late, rebuild the outstanding liability

Now suppose the June bill arrives August 18 instead of July 20. The July 1 reversal still removed the $3,000 accrued liability. At July 31, the unpaid June service remains an obligation. Reassess the amount and, assuming $3,000 remains the best estimate, debit utilities expense and credit accrued utilities $3,000 again. Set its reversal for August 1.

July's $3,000 credit from the original reversal and $3,000 debit from the renewed accrual cancel for June service. The July closing liability includes the unbilled June amount. July service needs its own accrual, with a separate service-period line. In August, reverse the renewed June accrual and enter the $3,180 bill. That pair leaves the $180 estimate difference, subject to the same review of materiality.

Age items by the original service period, not by the date of the latest renewed accrual. Otherwise a June obligation looks new every month. Follow up on old estimates and clear an accrual only when support shows the obligation was settled, recorded elsewhere, or no longer exists.

Recurring accruals still need current support

Keep a recurring checklist for utilities, payroll, and other predictable unbilled services. Update hours, headcount, service dates, usage, and rates each month. Compare recent invoices with estimates to identify a persistent bias. A recurring $3,000 accrual is too low if three successive bills have been $4,000 and the underlying usage has changed.

Link each new accrual to its expected reversal and eventual invoice. Confirm the reversal posted in the right month and account. A scheduled reversal that failed is still an open accrual, even if someone checked a box in the workbook.

Tie accrued liabilities to the general ledger

Keep vendor, service period, expense account, liability account, estimate basis, amount, accrual reference, reversal date, and invoice reference on the schedule. At month end, sum only the obligations still accrued in the ledger. Tie each liability account separately after all close entries have posted.

Roll opening accrued liabilities forward through reversals, new accruals, direct clearings, and supported adjustments. For example, $9,000 opening less $9,000 reversed plus $11,000 newly accrued gives an $11,000 ending liability. Reconcile that to the account, then inspect the underlying service periods. An equal total does not prove the right obligations remain.

The classic double-count error

A $3,000 accrual that never reverses, followed by a $3,180 invoice posted to expense, leaves $6,180 of cumulative expense for a $3,180 service and an unsupported $3,000 liability. Check for the actual reversal entry before approving the reconciliation. If the company uses direct clearing instead of reversals, the invoice must clear the existing liability and recognize only the estimate difference as additional expense. Keep those methods distinct for each item.

What this looks like in Vanward

Accrued liabilities is a step on the close board. The ledger balance comes from QuickBooks, and your accrual schedule is attached to the step, so the reviewer sees the estimate basis next to the number it supports.

When the schedule and the ledger disagree, the preparer writes a note explaining the difference. A different person reviews the step, and both names stay with the month.

Questions controllers ask

Why accrue an expense before the invoice arrives?: Under accrual accounting, a cost belongs in the period when the goods or services are received. Waiting for the invoice can understate both that month's expense and its liabilities. Support the estimate with service dates, usage, approved hours, or a contract.
Does every accrual need a reversing entry?: No. A reversing entry is a workflow choice. Some liabilities remain until they are settled or adjusted directly. For an accrual that reverses, document the reversal date and how the invoice will be booked so the same cost does not remain in expense twice.
What if the bill arrives two months later?: Track the original service period and reassess the outstanding obligation at each close. If the first reversal removed the liability and the bill remains unrecorded, re-accrue the supported amount. Do not add that amount on top of an accrual that is still on the ledger.
Can I copy recurring accruals from last month?: Use last month as a starting list, then refresh the estimate and check whether the bill has already been entered. Utilities, payroll, and contractor services change. A recurring template needs current service dates, support, and review, not just a repeated dollar amount.
What causes the classic accrual double count?: The accrual remains in expense and the invoice is also posted to expense for the same service. Check the scheduled reversal actually posted. If the liability is being cleared directly instead, ensure the invoice clears that liability rather than recording the full expense again.
How are accrued expenses different from accounts payable?: Accounts payable generally holds entered vendor bills. An expense accrual covers a received cost whose bill is not yet recorded. Search the payable ledger before accruing so an entered bill is not also included as an unbilled estimate.

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