Where do accruals appear on the balance sheet?

When you create an accrual, it is typically with the intent of record an expense on the income statement. What is the impact of such an accrual on the balance sheet, where assets, liabilities, and equity items are located?

If you record an accrual for an expense, then you are debiting the expense account and crediting an accrued liability account. Since an accrued expense is usually only for a very limited period of time (such as to record an expense for a supplier invoice that will probably arrive next month), this is a current liability. Therefore, when you accrue an expense, it appears in the current liabilities portion of the balance sheet.

It is possible (but not likely) that an accrued expense might appear in the balance sheet under long-term liabilities, but only if you do not plan to settle the liability for more than a year.

If you record an accrual for revenue that you have not yet billed, then you are crediting the revenue account and debiting an unbilled revenue account. The unbilled revenue account should appear in the current assets portion of the balance sheet.

Related Topics

Balance sheet overview
Classified balance sheet
Common size balance sheet
Comparative balance sheet
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Should there be negative cash on the balance sheet?