How to Set Up Accruals and Deferrals of Revenue

Overview

Accrual basis accounting allows businesses to recognises revenue when costs such as parts and labour are incurred, and not when the money actually changes hands. This increases the visibility of revenue and has the potential to help improve profitability.

Similarly if your company accepts payment upfront for work that is to be completed in the future you can now account for this with deferred revenue. This ensures that your income is automatically reconciled when work is completed and therefore gives you a more accurate report of what is being earned relative to when costs are incurred.

Learn more in How to Manage Accrual of Revenueand How to Manage Deferral of Revenue.

If you use Xero or QuickBooks Online you can transfer Accrual Journals to your accounting package, saving on double handling. Learn more in Cash versus accrual accounting explained.

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Edit Chart of Accounts

Cost Centres

Manage Accruals and Deferrals

Accounting Link

To create accrual or deferral revenue accounts:

  1. Go to System > Setup > Accounts > Chart of Accounts.
  2. Click Create An Account.
  3. Enter a Name for the account.
  4. Under Type select Accrual Revenue or Deferral Revenue as required.
  5. Enter the Account Number from your accounting package that the journals associated with this account will post to.
  6. Click Create.

Accruals Revenue and Deferral Revenue accounts can be archived. When they are archived you are prompted to transfer any outstanding accrual or deferral of revenue to a new account.

If transferring transactions and journals your chart of account needs to align with your accounting package. Learn more in How to Set up Chart of Accounts.

To apply accounts to cost centres:

  1. Go to System > Setup > Accounts > Cost Centres.
  2. Click Create Cost Centre or edit an existing cost centre.
  3. If creating a new cost centre enter a Cost Centre Name, select the Income Account, Expense Account and enter Budgets as required.
  4. Under Accrual Revenue Account select the account that accruals created in this cost centre will be posted to in your accounting package.
  5. Under Deferral Revenue Account select the account that deferrals created in this cost centre will be posted to in your accounting package.
  6. Click Create or Save as required.

If transferring transactions and journals the accounts assigned to your cost centres need to align with your accounting package. Learn more in How to Use Cost Centres.

If you use Xero you can map accounts between Simpro Premium and Xero in the accounting link.

  1. Go to Utilities > Xero.
  2. Note that Accrual and Deferral Revenue can only be posted to Xero. It is not currently available for other accounting packages.
  3. Click Account Mapping > Cost Centres.
  4. For each cost centre that has an accrual or deferral account associated select the Xero account that it should be mapped to.
  5. Click Save.

Accrual and deferral accounts are in addition to other accounts that can be mapped in the Xero accounting link. Learn more in How to Map Xero Accounts and Tax Codes.