When an expense is incurred in a prior period, but the payment will be made at a later date (for example, electricity or rent), it should be recorded using Accrual Basis Accounting (Matching Principle). This ensures that expenses are recognized in the period they occur, regardless of when payment is made.

1. At the Time of Expense Incurrence (before payment is made):

• Create Other expense documents from the Accounting module.

In the main tab, add Accural type as the transaction type 

When recording an accrued expense, the following entry should be made:

• Debit: Expense Account (e.g., Rent, Utilities, Services)
  • You can create a separate GL account, such as "Rent Expense," instead of grouping it with other expenses for better classification.
• Credit: Accrued Expenses / Accounts Payable (Liability)
  • You can use a "Current Liability" GL, such as "Accounts Payable," or classify it under "Other Current Liabilities" as needed.

2. When the Payment is Made (at a later date)

• Debit: Accrued Expenses / Accounts Payable

This clears the liability created earlier when the expense was recognized.

• Credit: Cash/Bank

This reflects the actual payment made for the expense.