Accrued Expenses amp Accounting Treatment of Accrued ExpensesAdd subheading 1

In last blog we discussed about Accrual Basis of Accounting v/s cash basis of accounting system. We also understood concept of accrued Income and treatment of accrued income in balance sheet and P&L accounts. In this article we are going to discuss about Accrued Expenses. The concept of accrued expense is also a part of accrual basis of accounting system.

What is Accrued Expense ?




In the U.S., when a small business grows, claiming the attention of investors or goes public, its accounting departments are required to immediately stick to the Generally Accepted Accounting Principles or GAAP.

Simply put, GAAP is a common, accounting language for companies to record accounting and financial information. The sole objective of GAAP is to enable organizations to have a standardized method of treating financial and accounting data so that the interpretation, analysis, sharing and communication of financial results and reports with the external parties will be easier and made transparent.


How Can You Prepare for Accounting Job Interview

You may also agree, the job of an accountant is not as easy as it is perceived. The accountant carries a heavy responsibility on his shoulders helping business organizations in taking the right decision based on the financial report. Hence, hiring such a personnel for the company is a tough job for the interviewer wherein he does not only analyse you on the basis of your basic accounting knowledge but also on the basis of your leadership, team management, and communication skills.

If it’s not easy to crack accounting interview, it’s not easy for an interviewer as well.


Understanding Accrued Income Accounting Treatment of Accrued Income

Cash Basis of Accounting System:

Cash Basis of Accounting is a system of writing books of accounts in which only cash transactions are recorded. This implies that in cash basis of accounting, revenue or expenditure is recorded only when cash is received / paid for the respective transactions. This system is generally used only by small traders who do not require to get their books of accounts audited. In this system, expenses are recorded only when cash is paid; similarly, revenues are recorded only when cash is received.



The term 'accounting conventions' includes those customs or traditions which guide the accountant while preparing books of accounts. Conventions provide a standardized methodology that acts as a reliable means to compare financial results of different years. Accordingly, accounting conventions govern how companies and people prepare financial reports.


Capital Receipts V2Fs Revenue Receipts

In one of our previous blogs we have discussed about Capital Expenditure and Revenue expenditure. Let us now understand Capital Receipts and Revenue Receipts.

Capital Receipts:

Capital receipts are the income received by the company which is non-recurring in nature. They are part of the financing and investing activities rather than operating activities. The capital receipts either reduces an asset or increases a liability. The receipts can be generated from the following sources:

Financial Management