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Definition · the close

Accruals

Accruals are accounting entries that recognize revenue or expenses in the period they are earned or incurred, before cash changes hands. For accruals, the important details are the accounting period, source evidence, reviewer, materiality threshold, and control purpose that make the treatment auditable during close, reporting, and later review.

Also known as accrued expenses, accrued liabilities, accrual accounting entries

Written by Pluvo TeamReviewed by Pluvo Team
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Why it matters

Understanding accruals matters because close, reconciliation, and audit work depend on consistent timing, source evidence, review thresholds, and ownership. A loose definition creates avoidable rework. When the term is tied to a source system, owner, and review cadence, it becomes easier to audit assumptions, catch changes early, and keep operators aligned.

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In practice

  • Revenue example

    Teams use accruals when they need to separate customer, contract, billing, recognition, and cash effects. That prevents a revenue movement from being misread as growth, churn, expansion, or timing noise.

  • Review example

    Accruals should be reviewed whenever the source system, calculation logic, time period, or decision owner changes. That keeps the definition useful instead of letting it drift into a label.

In practice, teams should define accruals with a clear source, owner, time period, and decision before they use it in reporting, planning, or operating reviews.

Understanding accruals matters because close, reconciliation, and audit work depend on consistent timing, source evidence, review thresholds, and ownership. A loose definition creates avoidable rework. When the term is tied to a source system, owner, and review cadence, it becomes easier to audit assumptions, catch changes early, and keep operators aligned.

A strong workflow for accruals separates the definition from the action: first agree what the term means, then decide how it is measured, when it changes, and who is accountable for the next step.

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FAQ

What is an accrual?

Accruals are accounting entries that recognize revenue or expenses in the period they are earned or incurred, before cash changes hands. For accruals, the important details are the accounting period, source evidence, reviewer, materiality threshold, and control purpose that make the treatment auditable during close, reporting, and later review.

What is the difference between an accrual and a deferral?

The boundary for accruals differs from related terms by scope, source data, time period, and decision use. In this glossary, it covers expenses or revenues recognized in the period they are incurred or earned, before cash changes hands, so teams should compare those boundaries before using it in reporting or planning.

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Sources

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