Keeping Accurate Records and Tracking Expenses

[ekuemoah]

I have get a utilities bill. On the Bill it says that the Billing Cycle is from May 15 - June 15. This is when the services are provided. I get the bill for it on the last day of May. When do I record the amount as an expense? Do I record it on May 31 which is when I received it or do I have to divide the expense up and record the amount of the expense for May in May 31 and the amount of expense for June in June since part of the services I paid for (expenses) occurred in May(from May 15 to 31) and the rest in June(from June 1 to June 15)?

I'm using the accrural method to keep my books. Under this method, I record expenses when they are incurred and not when I received the bill or paid the bill.

What about paying rent? I get the bill for the rent in the preceding month. For example, the month for July rent is received in the month of May. Do I record this bill in May or June, which is when I used the services?

Thank You

[ArcSine]

Question asked...

When do I record the amount as an expense? Do I record it on May 31 which is when I received it or do I have to divide the expense up and record the amount of the expense for May in May 31 and the amount of expense for June in June since part of the services I paid for (expenses) occurred in May(from May 15 to 31) and the rest in June(from June 1 to June 15)?

...and answered.
I'm using the accrural method to keep my books. Under this method, I record expenses when they are incurred and not when I received the bill or paid the bill.


...although as a practical matter, many accountants make their lives easier by not trying to split the bills, but instead just recording one whole invoice each month. This is true for recurring items where the amounts tend to cluster within a fairly close range, and hence doing it precisely correct has a poor effort-to-incremental-accuracy ratio.

Homework?

[Evan]

I agree with ArcSine.

Further, even as an auditor, we would not split hairs with things such as dividing between each of the months, as if you did this for over for a few months, you'd realize the difference in each month is probably just a few dollars... an amount so immaterial, it is generally impractical to account for that way.

[jamesray50]

For your rent bill, when you receive the bill enter a debit to prepaid expense and a credit to ap for the rent amount. At the beginning of the month do a journal entry to record the expense: debit rent expense and credit prepaid expense. When you pay the bill, debit ap and credit bank account. Hope this helps.