Accruals versus Debtors?

[Frankymo1e]

Is this statement true or false, as it conflicts with what I've been taught: &quot;Accrued income specifically excludes accruals for goods despatched but not invoiced, or services provided but not invoiced, which are both shown as trade debtors.&quot; It refers to goods sold [edited: formerly I said purchased, sorry!] by my business, services sold by my business, i.e. in both cases supplied by me to a customer but we have not yet raised an invoice.<BR><BR>I thought it remains an accrual until a bill is issued, when it becomes a trade debtor? Which is correct??

[Ditti]

I might be a bit confused here, but you seem to talk about goods received by your business, and also about trade debtors? Your supplier become trade creditors, not trade debtors.<BR><BR>If we are talking about expenses your business incurs, i.e your supplier sent you goods, but not yet invoiced you for them, I always accrue for them alongside other month end accruals and reverse them when the invoice is received, at which point they become a trade creditor.<BR><BR>If this should not be the case, I have been doing the accounts wrong all this time, would someone then be kind enough to correct me?<BR><BR>Thanks<BR><BR>Edit

[Frankymo1e]

Sorry that was a bit garbled. Okay, if it's about goods sold by us, then the Prudence requirement indicates that one shouldn't accrue as a trade debtor until an invoice is sent (e.g. the work may have been sub-standard, or the goods on sale-or-return). Although the supplier would have it as an accrual on receipt of the goods, we surely shouldn't have it as a debtor until they've signed for the goods. Any other method doesn't seem prudent! Prudence says you should take the msot pessimistic view (lowest valuation of assets, highest of liabilities) and a debtor is an asset. Or is this straying into provision for bad debts territory...

[LER]

A couple of months away from studying and Iâ??ve already forgotten most of it, but would I be right in saying that accrued income is only money that you know is definitely going to be received. In which case it would â??excludeâ?? goods or services not yet invoiced as there is no guarantee that you will be paid for them. This would be prudent as you are taking the lowest value.<BR><BR>Really any goods despatched should have been invoiced and if they are sub standard or returned then a credit note should be issued. In the meantime your customer is classed as a trade debtor within the accounts.<BR><BR>As a supplier, if you know that you owe money for goods but have not received an invoice for them then this should be classed as an accrual (obviously an expense, rather than income). <BR><BR>Sorry if Iâ??ve confused you even more.<BR>

[Melanie]

At work we accrue income that is billed after the year end but which has been performed or part performed in the year.<BR><BR>For example, if you bill weekly for work performed and your year end falls on a wednesday, then you are entitled to accrue the 3 days including wednesday.<BR><BR>Technically this isn't a trade debtor as you haven't issued the debt note or invoice, but accrued income does get included in the debtors part of the BS (usually combined with prepayments as the last item in current debtors). Also, if this were an audit and you asked the debtor to confirm the amount they owed the company, they wouldn't include any amounts that could be accrued because they only include invoices they have received.<BR><BR>Hope this helps rather than hinders,<BR><BR>Melanie :o)<BR><BR>

[Frankymo1e]

Ditti, LER and Melanie, thank you all for your help. I know what you mean about not using it for a few months... well, now I have to! :D Rings a bell about sticking it in the same palce on the BS as Debtors, in fact the guidance was given in the same part of our 'rulebook' as prepayments. So that makes sense. LEr, thanks for confirming it is prudent to not include them in debtors normally until an invoice is raised. It takes some days (sometimes weeks) to raise an invoice here as it is done by a different branch than that supplying the goods/services and teh paperwork takes time to go through them.