What are accruals in accounting?
Accruals are accounting entries that record revenue earned or expenses incurred in a period before cash moves or an invoice arrives, so the books reflect the period the activity belongs to.
In more detail
Under accrual accounting, an expense belongs to the month the service was received, not the month the bill is paid. At close, accountants book accruals for items such as goods received but not invoiced, unbilled consulting hours, bonuses and utilities. The estimates are reversed or trued up when the real invoice lands. It is manual, spreadsheet-heavy work that depends on information held by other departments. Automation can pull received-not-invoiced reports, draft entries from PO and timesheet data and prepare reversals, while the controller reviews amounts. The main risk is estimation error, so keep the basis for each accrual attached to the entry.
Example
On March 31 the firm has received $18,000 of goods with no invoice yet. The accountant books an $18,000 accrual to expense and a liability, then reverses it on April 1 when the invoice posts.