Active and passive accruals

Active and passive accruals serve to record revenues and expenses in the correct business periods. With clean and timely accruals, it is ensured that the accounting reflects the actual economic conditions in the company.

The accrual principle, as one of the central principles of accounting, is intended to ensure that revenues are matched against the expenses that were necessary to generate them. Only in this way can accounting draw an economically correct picture of the business situation. In the implementation of the accrual principle, active and passive accruals ensure a timely allocation of business success.

Active and passive accruals

Simply put, accruals are adjustment entries that ensure a correct allocation of expenses and revenues to the respective business periods. While active accruals are found on the asset side of the balance sheet, passive accruals belong to the liabilities.

Active Accrual

Active accrual (formerly: transitory assets) serves to record expenses paid for the following year or revenues not yet received in the fiscal year.

In the first case, it is about delimiting expenses that concern the new fiscal year but were already paid in the old fiscal year. Typical examples include advance payments of rent or insurance premiums.

In the second case, revenues that concern the old fiscal year but are received only in the new year are delimited. This type of accrual is applied, for example, when invoicing for work already done occurs in the new fiscal year.

Passive Accrual

Passive accrual (formerly: transitory liabilities) aims at the timely delimitation of unpaid expenses or already received revenues of the following year.

The first case serves to delimit expenses that still belong to the old fiscal year but will be invoiced only in the new fiscal year. This passive accrual is applied, for example, in the case of outstanding supplier invoices.

In the second case, revenues that concern the new fiscal year are to be delimited. These include revenues that have already been received in the old fiscal year, for which the corresponding counter-performance will only be provided in the new fiscal year. A typical example of this type of accrual is advance payments.

Findea helps you to keep an overview of your company's financial situation at all times.

• Further information
   
• Calculate an offer for fiduciary