What is accrued?

What Does accrued Mean

Accrued is a term that comes from the verb accrue , whose etymological root is found in the Latin word vindicāre (translated as “appropriate” ). The accrual action refers to contracting the right to receive some remuneration for providing a service, developing a job or some other title.

The idea of accrual , in this framework, refers to the act of accrual or the amount accrued. For example: "The accrued rate will report several million pesos to the national government" , "It was agreed that the payment be accrued on the 10th of each month" , "The tax must be calculated based on what was accrued during the last fiscal period" .
The accrual is linked to a contracted right that has not yet been collected.
What is accrued
It can be said that an accrual is a contracted right that has not yet been collected, or an acquired obligation that has not yet been paid. The accrual principle , for its part, establishes that income or expense arises at the moment of commitment , increasing or reducing equity for accounting purposes at that time .

As a principle, therefore, the accrual supposes that the operations must be recorded when the economic event that produces them takes place , regardless of whether it has been collected, invoiced or contracted. Suppose that a company hires a worker who carries out its activity in April, and pays him his salary at the beginning of May. The company , according to the accrual principle, must record the accrual of the expense as a result of the month of April, regardless of whether the employee was paid in May.
Ultimately, the accrual principle establishes that gains and losses must be recognized over time , regardless of whether they have been collected or paid. Registering what is won or lost at the time of collection or payment is an error from the accounting criteria.
The accrual principle establishes that an operation must be registered when the economic event that generates it takes place.
How to allocate income and expenses
In other words, the accrual principle provides us with a criterion to allocate expenses and income temporarily, according to the actual flow of services and goods, instead of taking into account the monetary flows that are generated. By applying this to accounting, we obtain more relevant and accurate data than through the cash principle, which is defined below.

In the first place, it is important to point out that the accrual (or accrual ) principle and the cash principle are two methods that companies use for their management, for the recognition of their income and expenses. As established by the cash principle , these two movements must be imputed according to the monetary flow , a concept that is also known as the monetary flow and which refers to the flow of money that begins with the payment that consumers make. to companies for the goods and services they provide and ends when workers receive it.
By using the cash principle, therefore, income and expenses are only recognized once the money comes in or goes out, respectively, regardless of when the good or service was rendered. This criterion is applied, for example, in the system of payment of public services, such as the provision of electricity: when we pay a bill, the expense is associated with that moment and not with the operation that is documented in the document itself .
There is the concept of accrued expense , which refers to that which has been incurred but has not yet been paid, and in this way it is understood what we make of the electricity we receive from the supplier company before paying for it.

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