JE-131 Dec 2025Adjustingposted
Accrue December's contractor work.
| Account | Dimensions | Debit | Credit |
|---|---|---|---|
| 6800 Contractor expense | 4,000 US Dollar | ||
| 2100 Accrued expenses | 4,000 US Dollar | ||
| Totals | 4,000 US Dollar | 4,000 US Dollar | |
Balanced.
Reversed by JE-2
Journal entry for accrued expenses
At month-end, debit the expense and credit Accrued expenses for work received but not yet billed. Reverse the accrual on the first day of the next month, then book the vendor's bill as usual when it arrives.
- December work, unbilled
- $4,000
- December expense
- $4,000
- January net expense
- $0
- Entity
- Illustrative company
- Basis
- Accrual
- Currency
- USD
- Period
- December 2025 – January 2026
The worked example
A contractor works through December and invoices $4,000 on January 5, 2026; the company pays on January 20, 2026. Closing December, the company accrues the cost, reverses it on January 1 and books the bill when it arrives.
Adjusting entry · December 31, 2025
Reversing entry · January 1, 2026
JE-21 Jan 2026Adjustingposted
Reverse the accrual.
Journal entry JE-2, 2 lines Account Dimensions Debit Credit 2100 Accrued expenses 4,000 US Dollar 6800 Contractor expense 4,000 US Dollar Totals 4,000 US Dollar 4,000 US Dollar Balanced.
Reverses JE-1
Transaction · January 5, 2026
JE-35 Jan 2026Manualposted
Book the contractor's invoice.
Journal entry JE-3, 2 lines Account Dimensions Debit Credit 6800 Contractor expense 4,000 US Dollar 2000 Accounts payable 4,000 US Dollar Totals 4,000 US Dollar 4,000 US Dollar Balanced.
Transaction · January 20, 2026
JE-420 Jan 2026Manualposted
Pay the invoice.
Journal entry JE-4, 2 lines Account Dimensions Debit Credit 2000 Accounts payable 4,000 US Dollar 1000 Cash 4,000 US Dollar Totals 4,000 US Dollar 4,000 US Dollar Balanced.
What the entries do to the accounts
Every entry above posted to the ledger, starting from zero balances: the net debit or credit each account is left with. Debits equal credits, so the books still balance.
| Account | Debit | Credit |
|---|---|---|
| 1000 Cash | 4,000 US Dollar | |
| 6800 Contractor expense | 4,000 US Dollar | |
| Totals | 4,000 US Dollar | 4,000 US Dollar |
2 accounts net to zero across the entries and are not shown.
Why it is booked this way
December's work is December's cost even if the invoice arrives in January. The accrual puts it in the right month and shows what the company owed on December 31.
The reversal on January 1 is a convenience, not a rule: it lets accounts payable book the vendor's bill in January exactly as it always does, and the January P&L nets to zero for work already counted in December.
Common mistakes
- Accruing at month-end and not reversing, then booking the bill too — the cost lands twice.
- Accruing round guesses with no support. An accrual should point at a contract, a timesheet or a purchase order.
- Accruing a bill that has already been entered in accounts payable.
Questions
- Why reverse an accrual?
- So the bill can be booked normally when it arrives without counting the cost twice. The reversal takes the accrual out on day one of the new month; the bill puts the real figure in; the month nets to the difference between the estimate and the bill, if any.
- What is the difference between accrued expenses and accounts payable?
- Accrued expenses are costs incurred without a bill yet. Accounts payable holds bills that have been received and approved. Both are liabilities; the difference is whether the vendor's invoice exists.
Terms on this page
Work with this entry
The tool that computes the schedule, the concept behind it, the entries that come next and the components that render them.
- Journal entry balancerPaste an entry, see the out-of-balance, and copy an import-ready CSV. Put your own figures in and get the schedule behind this entry.Tool
- Accrued expenses, explained for foundersCosts you've incurred by month end but haven't been billed for yet, like legal work, usage-based software or payroll that spans the month end.Doc
- Accrual basis vs cash basisCash basis records revenue and expenses when money moves; accrual basis records them when they are earned and incurred — so a cost paid a year in advance is one month's expense under cash and twelve months' under accrual.Compare
- Accrued expenses vs accounts payableAccrued expenses are costs incurred that no bill has arrived for yet; accounts payable are bills received and approved but not yet paid — both are liabilities, separated by whether the vendor's invoice exists.Compare
- Prepaid expense vs accrued expenseA prepaid expense is cash paid before the cost is used, an asset; an accrued expense is a cost used before it is paid or billed, a liability — the same timing difference running in opposite directions.Compare
- Accrual vs deferralAn accrual records revenue or expense before the cash moves; a deferral records cash that has moved before the revenue or expense is recognized — accruals create receivables and payables, deferrals create prepaids and deferred revenue.Compare
- Reversal vs reversing entryA reversal is a new entry that cancels a posted entry that was wrong, leaving both in the ledger; a reversing entry is a planned reversal of a month-end accrual on the first day of the next period, so the real bill can be booked normally.Compare
- Adjusting entry vs closing entryAdjusting entries are made at period-end to put revenue and expenses in the right period; closing entries are made at year-end to move the period's revenue and expense balances into retained earnings.Compare
- Journal entry for accrued wagesAt month-end, debit Wages and salaries and credit Accrued wages for the days worked since the last payday. On payday, reverse the accrual or debit Accrued wages for the part of the payroll it covers.Entry
- Journal entry for accrued interestAt month-end, debit Interest expense and credit Accrued interest for the interest earned by the lender since the last payment. When the payment is made, debit Accrued interest and credit Cash.Entry
- Journal entry for accounts payableWhen an approved vendor bill is entered, debit the expense or asset it bought and credit Accounts payable. When it is paid, debit Accounts payable and credit Cash.Entry
- AdjustingEntryFormTemplated by type. Auto-reverse defaults on for accruals.Component
- EntryReversalDialogHold-to-confirm. Never a delete.Component
An illustrative company, not anyone’s real books. Every figure on this page is computed from the inputs in the example and posted by the same functions as the journal entry balancer. General information for US companies under US GAAP, not accounting or tax advice.