When do we use the term accrued in accounting?

Accrued is used when an amount is due to be paid or received. This term used to replace receivable or payable in an account. It is a receivable when it is paired with income account otherwise payable if paired with expense account. For example Interest receivable could be written as accrued interest income and Interest payable as Accrued interest expense.

The Term Accrued is used when the expense related to current financial year will be paid in the next financial year. Example: Salaries Expense of the December is accrued as it will be paid in January or Next financial year

In Accounting the accrued mean the revenue or expense which has earned or utilize or incurred regardless its cash has received or paid. If any company is recording their transaction on the above mention bases than they are following accrual base accounting system.

 

In accrude accounting we record entry when a sell is occur mean cash is not involved in it mean it is not cash base

Generally when an income is due from a customer or from client, then such income is called as accrued income. simply means the amount is due from customer but not received.

accrued is used when actually benefit is received by the company and opposite is the cash accounting when cash is paid for that benefit. e.g. A company uses internet for a month thus expense is booked in that month when actually benefit of using is enjoyed by the company irrespective of when cash will be paid.

Following entry would be passed

internet bill / utilities Dr.

playable                                Cr. 

 

how ever cash is paid in the next month and following entry is passed

payable                     Dr.

cash                                      Cr.

 

Accrued accounting is requirement of financials reporting standards IAS.1

Accounting method that measures the position and performance of a company by recognizing transactions based on principles of revenue recognition and matching principle regardless of when cash is received or paid. The general idea is that economic events are recognized by matching revenues to expenses at the time in which the transaction occurs rather than when payment is made (or received).

when we are not sure that the company will work another period of time

 

When something is actually occurred but you have not  paid or received yet or paying or receiving after the focused/current period, these all are called accrued. e.g. Accrued Expenses such as Accrued Salaries which also called salary payable. Accrued Income, etc.

Simple definition is expenses and income due but not paid/received, like electricity bill, telephone/ interest and others such type of consumption/receiving we have already used/earned in current month, but do not make payment/received. We prepare journal voucher and record these expenses/income in books of accounts.  

The word accrued is used when we make provisions in financial statements for the work that has been done, but the invoice of which is not yet received.