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Here’s the step-by-step process to record this in the system:
1. At the Time of Expense Incurrence (before payment is made)
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Create Other expense documents from the Accounting module.
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The reversal and the Invoice Received document offset each other, effectively canceling the expense while recording the liability to pay the supplier. Please note that, due to accrual accounting, the initially recorded expense represents the actual expense.
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3. When the Payment is Made
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Create a Bank/Cash payment document Payment document by using the Generate option from the Invoice Received document, or create a new Bank Payment document manually from the Money module.
In the main tab, keep the transaction type as Others, and in the payment details tab, fill in the GL account used in the Other expense document i.e., Other current liabilities.
Once the Bank/Cash Payment Document is posted, the following accounting entry will be generated:
Debit: Accrued Expenses / Accounts Payable Other Current Payables (This clears the liability that was recorded when the expense was initially recognized)
Credit: Cash/ Bank (This reflects the actual payment made for the expense)
This ensures the liability is properly settled, and the financial statements accurately reflect the transaction.
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