Calculating the Accrual Amount
Use
The accrual amount is the amount that revenue recognition posts to financial accounting for each item in the posting period .
Revenue recognition determines this amount by dividing the duration of the posting period by the duration of the accrual period, and multiplying the resulting value by the total accrual value.The calculation is shown below:
Accrual amount =
( Duration of posting period ÷ Duration of accrual period ) × Total accrual value
Your financial calendar contains 12 posting periods, which correspond to the 12 calendar months. You have a total accrual value of 12,000. If the duration of your accrual period is 12 (calendar months) and the duration of your posting period is 1 month, you calculate the accrual amount as follows:
1000 = (1 ÷ 12) ×12000
The table below shows examples of posting for companies whose financial calendar does notcorrespond to the normal calendar year:
Example |
Period |
Calculation of period duration* |
Calculation of amount |
Amount per period |
|---|---|---|---|---|
1 |
May 1 through May 27 |
27 ÷ 31 or 0.87097 months |
(0.87098 ÷ 12)× 12000 |
870.98 |
2 |
October 28 through November 29 |
33 ÷ 31 or 1.0645 months |
(1.0645 ÷ 13) × 12000 |
982.62 |
3 |
June 29 through July 16 |
18 ÷ 30 or 0.6 months |
(0.6 ÷ 13) × 12000 |
553.84 |
* The denominator for calculating the period is determined by the length of the calendar month in which the posting period begins.