Month-end close Updated November 2026

Accruals at month-end

An accrual records an expense incurred but not yet billed (Dr Expense / Cr Accrued Liabilities) or revenue earned but not yet invoiced (Dr Accrued Revenue / Cr Sales) so the month shows the right profit. Most accruals are reversed on the first day of the next month so the actual invoice posts normally.

Syntax

Accrued expense: Dr Expense / Cr Accrued Liabilities. Accrued revenue: Dr Accrued Revenue (asset) / Cr Revenue. Reverse next month.

Part	What it is
`Accrued Liabilities`	Liability for unbilled costs; separate from Accounts Payable
`Accrued Revenue`	Asset for unbilled sales; separate from Accounts Receivable
`Reversal`	Opposite entry dated the 1st of next month
`Estimate`	Prior bills, contracts, usage; document the basis

Examples

Month-end: electricity used, bill not received, last three bills averaged 350

Result: Dr Utilities Expense 350 / Cr Accrued Liabilities 350. On the 1st: Dr Accrued Liabilities 350 / Cr Utilities Expense 350. The 362 bill posts normally when it arrives; net expense next month is 12.

Consulting work of 2,000 completed on the 29th, invoice to be issued on the 3rd

Result: Dr Accrued Revenue 2,000 / Cr Consulting Revenue 2,000; reverse on the 1st; the invoice posts on the 3rd.

Bonus of 6,000 earned this month, paid next quarter

Result: Dr Salaries Expense 6,000 / Cr Accrued Bonus 6,000; not reversed, cleared when paid.

Common mistakes

Forgetting the reversal: the actual bill posts on top of the accrual and the expense is doubled.
Accruing to Accounts Payable: the AP aging then disagrees with the control account.
Accruing the same cost two months running without reversing: the liability grows with nothing behind it.

Practice Accruals at month-end

These drills check your answer on live data, free, no account needed.

Service business closeClassify every line, enter both adjusted balances, then choose the journal entry the company must record for each item that affects its books.
Rental company closeClassify every line, enter both adjusted balances, then choose the journal entry the company must record for each item that affects its books.

Questions

What is the difference between an accrual and a prepaid?

An accrual records a cost before the bill or payment (liability). A prepaid records a payment before the cost (asset) and expenses it over time.

Do all accruals get reversed?

Reversal suits recurring bills that will be posted when received. Accruals for bonuses, audit fees or legal claims are kept until settled.

Prepaid expense scheduleBuild a prepaid schedule listing each prepayment, its term and the monthly amortization, so the Prepaid Expenses balance is supported every month. Entries.
CutoffCutoff means every transaction is recorded in the period it belongs to: sales when goods ship, purchases when received. How to test cutoff and fix an error.
Month-end close checklistA month-end close checklist in sequence: cutoff, bank and card reconciliations, AR and AP, accruals and prepaids, fixed assets, balance sheet recs, lock.
Interest income journal entryRecord bank interest with a debit to Cash and a credit to Interest Income when the statement shows it. Includes the accrual version for interest not yet paid.