# Bills on the books: posting, paying and accruing

> The bill entry, the payment entry, accrued expenses for costs with no bill yet, and cut-off, on Northwind's drills and power.

Source: https://lopifi.com/learn/recording-bills-and-accrued-expenses
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**How do you record a bill in the books, and when is an expense accrued instead?** The bill entry, the payment entry, accrued expenses for costs with no bill yet, and cut-off, on Northwind's drills and power.

Posting a bill and paying it are two different events, and they usually fall in different weeks or months. The bill records the cost and the obligation together; the payment settles the obligation and touches no expense. Northwind's JE-4 and JE-9 are the pair.

*[Journal entries: JE-4, JE-9]*

The bill, then the payment.

|  | Posting the bill | Paying it |
| --- | --- | --- |
| When | When the goods or service arrive and the bill is approved | On the due date, in a payment run |
| Debit | The expense or asset it bought | 2000 Accounts payable |
| Credit | 2000 Accounts payable | 1000 Cash |
| P&L effect | The cost lands in this period | None |
| Northwind | JE-4, September 3, 2026 | JE-9, September 20, 2026 |

Posting a bill vs paying it.

## Costs with no bill yet: accrued expenses

Some costs arrive before their bill does. Northwind used $450 of power in September and the utility would not bill it until October. With no bill there is no payable, so the cost is an [Accrual](https://lopifi.com/md/glossary/accrual): debit the expense, credit an [accrued liability](https://lopifi.com/md/glossary/accrued-liability). At September 30 Northwind owes $6,000 on bills and $450 on costs nobody has billed.

*[Journal entries: AJE-3]*

AJE-3: September's power, accrued.

> “Accrual accounting attempts to record the financial effects on an entity of transactions and other events and circumstances that have cash consequences for the entity in the periods in which those transactions, events, and circumstances occur rather than only in the periods in which cash is received or paid by the entity.”

© Financial Accounting Foundation. All rights reserved.

— [CON 8, Introduction — as amended by Ch. 4, App. A (carrying forward CON 6, ¶139)](https://www.fasb.org/concepts-statements), What accrual accounting is for

When the real bill lands on October 9, 2026, for $472.80, Northwind does not book a second $472.80 of expense on top of the estimate. It posts a [reversing entry](https://lopifi.com/md/glossary/reversing-entry) on October 1, 2026 that cancels AJE-3, then books the bill as an ordinary bill. October's power expense nets to the $22.80 the estimate missed by, a small [True-up](https://lopifi.com/md/glossary/true-up).

*[Figure: posting and reversal]*

The estimate, its reversal and the real bill. All three stay on the record; none is edited.

**Wrong:** Book the $472.80 bill and leave AJE-3 standing.
October expense: $472.80, and 2200 never clears.

**Right:** Reverse AJE-3 on October 1, 2026, then book the $472.80 bill.
October expense: $22.80.

Without the reversal (or clearing the accrual directly against the bill), September's power is expensed twice: once as the estimate, once as the bill.

## Cut-off

[Cut-off](https://lopifi.com/md/glossary/cutoff) is getting each cost into the period it belongs to. The test is when the goods or service arrived, not the date on the bill or the date it is paid. At each month end, list what was received and not yet billed, accrue it, and check that bills dated in the new month for last month's work were not left out.

| What happened | September? | Why |
| --- | --- | --- |
| Received Sep 3, billed Sep 3, paid Sep 20 | Yes, as a bill | JE-4 |
| Used in September, billed Oct 9 | Yes, as an accrual | AJE-3 |
| Received Oct 2, billed Sep 30 | No | The goods arrived in October; a bill dated early does not move the cost |
| Ordered Sep 28, not yet delivered | No | A purchase order is a commitment, not a liability |

Which period a cost belongs to.

— [ASC 405](https://asc.fasb.org/405/tableOfContent), Liabilities

> **Catch duplicates before they post.** The same invoice often arrives twice, by email and as a reminder. Check every new bill against the vendor plus the vendor's own invoice number, and flag the same vendor and amount within a few days. A duplicate bill that posts becomes a duplicate payment in the next run.

## Where this lesson's rules come from

- [CON 8, Introduction — as amended by Ch. 4, App. A (carrying forward CON 6, ¶139)](https://www.fasb.org/concepts-statements) — What accrual accounting is for (concepts)
- [ASC 405](https://asc.fasb.org/405/tableOfContent) — Liabilities (codification)

## Read further

- https://lopifi.com/md/journal-entries/accounts-payable
- https://lopifi.com/md/journal-entries/accrued-expenses
- https://lopifi.com/md/differences/accrued-expenses-vs-accounts-payable
- https://lopifi.com/md/differences/accrual-vs-cash-basis
- https://lopifi.com/md/startups/accrued-expenses-vs-accounts-payable
- https://lopifi.com/md/accounting/accrued-expenses
- https://lopifi.com/md/accounting/cutoff
- https://lopifi.com/md/accounting/accounts-payable
- https://lopifi.com/md/tools/duplicates
- https://lopifi.com/md/docs/domain/04-schedules-and-accruals
- https://lopifi.com/md/docs/domain/02-periods-and-close
- https://lopifi.com/md/docs/domain/06-procure-to-pay

- **Track:** [Accounts payable](https://lopifi.com/md/learn/ap)
- **Lesson:** Lesson 5 of 8 — 11 min
- **Terms taught:** [Accounts payable](https://lopifi.com/md/glossary/accounts-payable), [Accrual](https://lopifi.com/md/glossary/accrual), [Accrued liability](https://lopifi.com/md/glossary/accrued-liability), [Reversing entry](https://lopifi.com/md/glossary/reversing-entry), [True-up](https://lopifi.com/md/glossary/true-up), [Cutoff](https://lopifi.com/md/glossary/cutoff), [Bill](https://lopifi.com/md/glossary/bill)
- **Previous:** [Payment terms and early-payment discounts, AP · Lesson 4](https://lopifi.com/md/learn/payment-terms-and-early-payment-discounts)
- **Next:** [Payment runs, payment methods and fraud controls, AP · Lesson 6](https://lopifi.com/md/learn/vendor-payment-runs-and-fraud-controls)
- **The course:** https://lopifi.com/md/learn