What’s the difference between perpetual accrual and period end accrual

Posted on July 16th, 2012 by Sanjit Anand || Email This Post

For perpetual, or on receipt accrual accounting, a receiving transaction automatically creates a receipt accrual journal entry debiting receipt inventory and crediting uninvoiced receipts. After delivery of a receipt to its final destination, the receipt inventory account is cleared and a material account is debited.

For period end accrual, no accounting is created at either material receipt or at delivery to a final destination.

Take a note, Period end accrual applies only to expense items, as inventory items are alwaysaccrued on receipt.

If you use perpetual accrual accounting, you do not need to run the Create Uninvoiced Receipts Accruals process.

For period end accrual accounting, if an invoice for the receipt is not entered by period end, the Create Uninvoiced Receipt Accruals process generates an accrual and transfers the accounting to the general ledger. The reversing journal is created with an incomplete status. You must run Create Accrual Reversal Accounting to change the journal status to Complete and transfer it to the general ledger.

For perpetual accruals, the invoice accounting debits the accrual account and credits the liability account.

For period end accruals, the invoice accounting debits the expense account and credits the liability account.

Why Are These Accrual Processes so Important?

• Valuable integration control
• Monitors accuracy of receiving and payables processes
• Provides a vital barometer over these activities
• Helps to ensure accurate inventory counts
• Ultimately affects your profits

1. Accrual Accounting (Periodic Accrual)
2. Key accounts – P2P Cycle
3. Period Close Processing Checklist -> R12 Payables
4. Accounting fundamentals for Techies : Encumbrance – Part II
5. A note on sub ledger reconciliation reports during period closure