Approach Using Actual Values

The Approach Using Actual Values is an accounting method frequently used when a pay period intersects two different accounting periods.

Suppose your company’s accounting periods are on a monthly basis and pay period C intersects accounting periods June and July. The posting date for pay period C is derived from the end date, or the check date of the pay period. Suppose your posting date for pay period C is in the July accounting period. All the actual values for pay period C, then, can be posted into the July accounting period. Financial Accounting will then determine what amount of the actual values for pay period C should be transferred into the June accounting period.

Financial Accounting can debit a special expense account with this amount for the part of payroll period C that belongs to June. To balance the postings in the June accounting period, a provisional account can then be credited with the same amount that was debited to the special expense account mentioned above.

For the July accounting period, you balance these accounts by reversing the two postings. You can credit the special expense account and debiting the provisional account with the appropriate amounts.

It may occur that, for example, the June accounting period is already closed when you want to post the actual values into June. In this event you must post the actual values into the next, in this case the July, accounting period. One option is to do the posting similar to the way it is done in the Approach Using Estimates .