PDA

View Full Version : When do I journalize this?



ekuemoah
06-04-2012, 05:36 PM
This is not a homework problem.

I keep the books for my home biz and want to know how to record this transaction. I got a cable bill on May 29, 2012. I journalized and posted the bill on the day that it was received. However, the expense is for services that are provided or used in part in May and in part during the month of June. Do I record the transaction in June or in May? I'm using the accrural method. The bill payment date is going to be in June.

vangogh
06-05-2012, 02:08 AM
I'm not an accountant so take what I say with a grain of salt.

If you were using the cash method you're report things the day the money exchanged hands, however with the accrual method you record the transaction when an order is made, services were rendered, or an item delivered. When those things are actually paid for doesn't matter. You wait until the service is completed or all parts of an order are received so in your case since the service isn't completed until June, I think you record the transaction in June.

I'm getting all this information from an article about cash vs accrual accounting (http://www.nolo.com/legal-encyclopedia/cash-vs-accrual-accounting-29513.html) on the Nolo website, which I would think is correct.

Evan
06-05-2012, 10:14 PM
If the cable bill is received May 29th for the period May 15th - June 14th (as an example), it'd be easier just to expense it in June; however, you typically pay in arrears (you'd typically get a bill on June 20th for May 15th - June 14th).

I never see businesses actually accrue these expenses half to one month and half to another (or pro-rated according to the dates). Generally, if a business has 12 months of utility expenses recorded -- that's good enough. In theory, the prior year may have been over/understated, and at year-end it's the same thing... but it all balances out at the end of the day. From a financial statement perspective, it'd probably have an immaterial effect, so why bother creating more problems than you need.