Accounting Crew: How do you record negative accruels.

[ICRS]

Accounting Crew: How do you record negative accruals.

We have a liability that is due at year 5. This liability has both negative and positive accruals each year. Positive being we owe money, negative being we don't.

Year 1: + 1,000,000 is accrued
Year 2: + 1,500,000 is accrued
Year 3: + 500,000 is accrued
Year 4: - 250,000 is accrued
Year 5: - 250,000 is accrued

On the end of year 5 we will also pay the 2,500,000.

How would we record these liabilities each year.

 

[ICRS]

Accrual might be the wrong choice of words since I suppose you can't negativily accrue something. Our liability is decreasing, is the main idea. This all represents a single liability, 1 account.

 

[JS80]

The question first has to make sense for us to help you.

 

[Ns1]

offset it since it's a decrease in liability?

Year 1: Cr Fail
2: Cr Fail
3: Cr Fail
4: Dr Fail
5: Dr Fail

 

[dbk]

1, 2.5, 3, 2.75, 2.50

 

[UncleWai]

Stock and flow concept mate.

 

[krunchykrome]

Originally posted by: Ns1
offset it since it's a decrease in liability?

Year 1: Cr Fail
2: Cr Fail
3: Cr Fail
4: Dr Fail
5: Dr Fail

lol

On a serious note, Im not sure I understand exactly what the OP is saying.

Sounds like you guys accrue expenses every year and decrease the accrual when they're paid. Kind of like interest that doesnt have to be paid for a while.

When it's time to make the accrual.

Debit the expense
Credit the accrual

when it's time to pay off the accrual

Debit the cash, a/r, etc
Credit the accrual

The last payment, which sounds like a baloon payment...you just debit the liabilty, and credit the asset



what exactly is it that you guys are accruing?

 

[ggnl]

You would have to tell us why the liability is decreasing to fully answer the question.

The typical balance of a liability is credit, so you would debit the liability account to decrease it's balance. But it would require an offsetting credit to whatever asset account is being used to pay down the liability.

 

[Ns1]

Originally posted by: krunchykrome

Originally posted by: Ns1
offset it since it's a decrease in liability?

Year 1: Cr Fail
2: Cr Fail
3: Cr Fail
4: Dr Fail
5: Dr Fail

lol

I was 100% serious in my reply. OK maybe 50% serious. Accounting is fun...right?


Our old accounting society made tshirts that said "DEBIT FUN"

 

[CPA]

Originally posted by: Ns1

Originally posted by: krunchykrome

Originally posted by: Ns1
offset it since it's a decrease in liability?

Year 1: Cr Fail
2: Cr Fail
3: Cr Fail
4: Dr Fail
5: Dr Fail

lol

I was 100% serious in my reply. OK maybe 50% serious. Accounting is fun...right?


Our old accounting society made tshirts that said "DEBIT FUN"

Those wild and wacky accountants.

 

[CPA]

OP, if this accrual is due in 5 years, why are you not accruing the whole thing in year one. What exactly is making it fluctuate?

 

[krunchykrome]

Originally posted by: CPA
OP, if this accrual is due in 5 years, why are you not accruing the whole thing in year one. What exactly is making it fluctuate?

Im guessing they're accruing some type of interest on a mortgage or a loan thats payable at a later date (Principle + all accrued interest)

 

[Kelvrick]

Originally posted by: krunchykrome

Originally posted by: CPA
OP, if this accrual is due in 5 years, why are you not accruing the whole thing in year one. What exactly is making it fluctuate?

Im guessing they're accruing some type of interest on a mortgage or a loan thats payable at a later date (Principle + all accrued interest)

How to accrue it would also depend on what type of organization they are, wouldn't it? Non-profits, housing units, private corporations and such and then what they are accruing or am I just talking out of my ass that the OP needs to give some more critical information.

 

[ICRS]

This is a tax liability, which unlike most taxes isn't due every year but at year 10.

The total liability increase if we make over x amount in that year, and decrease if we make under y amount.

To be more exact this Tax Arbirtrage Rebate Liability.