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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

Standard calendar year

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

Non-standard calendar year

The table below shows examples of posting for companies whose financial calendar does notcorrespond to the normal calendar year:

Non-standard 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.