Accruals are adjustments made to the profit and loss of the company based on the fact that you have incurred an expense, but haven't necessarily paid for it yet. It is considered to be an accounting adjustment that moves the expense back to an earlier month when the amount is considered to have been incurred.

What's included

Bills paid in arrears such as electricity or other utility bills.

Using the above as an example you might pay for your company electricity bill of £600 on the 1st of July 2019, but this was for the first six month of the year. Therefore if you prepared your accounts say on the 30th of April, the expense wouldn't appear and you'd end up paying more tax on higher profits. You should have recorded £400 worth of expense for the first fourth months of the year. This recording of the £400 is called an accrual.

What's not included

Accrued Income should be dealt with in the asset category.

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