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  • Writer's pictureRayanne Armand

Understanding Accruals We at Qube Accountants would like to address a crucial aspect of your service charge accounts preparation: understanding accruals and the importance of locking bookkeeping rec

We at Qube Accountants would like to address a crucial aspect of your service charge accounts preparation: understanding accruals and the importance of locking bookkeeping records once year-end information is submitted. This article aims to provide clarity on these topics to ensure a smooth and accurate year-end process, saving you time and headaches.


What are Accruals?

Accruals are adjustments made to your financial records to account for revenues earned and expenses incurred that have not yet been recorded at the end of an accounting period. This ensures that all income and expenses are matched to the period they relate to, providing a true and fair view of your financial position.

For example, if a management fee invoice for services provided during the 31 Dec 2023 period has not been issued by year-end due to cash flow constraints faced by the site, it must be accrued for in the 2023 accounts. This means we recognize the expense as incurred, even though the invoice will be issued later.. This principle aligns income and expenses with the period they relate to, which is fundamental in preparing accurate service charge accounts​.

Then in the next period (31 Dec 2024) when the invoice is issued/received do not unlock your records and backdate the expense. The entry must be added to the bookkeeping records for the 31 Dec 2024 year. This may result in 2 lots of the expense appearing in one year. This is not a problem because the year end accruals will deal with this; when the accounts are prepared for 31 Dec 2024 for accrual from 31 Dec 2023 will be reversed and offset the “extra” expense in the year. 


Importance of Locking Bookkeeping Records

Once the year-end information has been submitted for preparing your service charge accounts, it is vital to lock your bookkeeping records. This practice prevents any further changes that could lead to discrepancies and errors in the final accounts.


Practical Steps for Year-End Preparation

  1. Identify Accruals: List all expenses that have been incurred but not yet invoiced. This includes ongoing services or goods received before the year-end but invoiced afterward.  

  2. Submit Accurate Information: Provide the accounts preparation team with all the necessary details, including any known accruals, before they start preparing the accounts.  

  3. Lock Records Post Submission: After providing the year-end information, lock your bookkeeping records to prevent further entries.  

  4. Reversal of Accruals: When the actual invoices are received in the new financial period, they must be recorded in the new period (do not unlock your records to backdate the expense). When the next set of accounts are prepared the reversal of the accrual will balance things out. 


We hope this article helps clarify the process and importance of accruals and locking records for year-end accounts. If you have any questions or need further assistance, please do not hesitate to contact us.


Before we say goodbye I wanted to drop a few links to some helpful resources:


Facebook Group for Block Managers

Simply click here to become a part of "Brilliant Block Managers Asking Dumb Questions" on Facebook. The more, the merrier! Spoiler alert: Your block management game is about to level up!


Our Most Popular Training

Fast & Efficient Service Charge Accounts Preparation - A recording of a webinar we ran. If you would like a copy of the slides or the year-end checklist please let me know by responding to this email.


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