Incurred Vs. Accrued
Hi everybody,We use the words “Incurred” and “Accrued” interchangeably in our accounting related issues. Is that accurate? or is there any difference between the two words??
I am not sure the contents, however, I don’t think “incurred” and “accrued” can be used interchangeably in most cases that I could think of.
Would you like to share some example for further information?
Yes, there is a difference – the terms are not synonymous. It is proper to accrue an expense that has been incurred, but an accrual may also be recorded for revenues that have been earned (the distinguishing factor being that revenues are earned and expenses are incurred, and that an accrual may be recorded for both types of transactions).
In my world, incurred is when you have received a good
or service and are now liable to pay for it. Accrued
is when you have actually recorded that liability on
your records, but have not yet paid for it.
Anything incurred should be accrued, unless it has
been paid for. You should never accrue for something
that has not been incurred. Does that make any sense?
Accrued refers to an accounting action (ie journal entry) to record and expense or revenue. For example, accrued legal fees might be recorded to reflect the expense of services provided for which an invoice has not yet been received and recorded. Accrued revenue would be recorded for revenue earned but not yet invoiced to the customer.
Incurred refers to costs that the company has undertaken. For example, if a law firm provides $1,000 of services to a company, that company has incurred that cost – whether or not they have received an invoice. Incurred for costs is similar to “earned” for revenue.
You normally accrue for all costs that have been incurred, if they have not been recorded otherwise. You normally accrue for all revenue that has been earned and not invoiced to the customer.
Yes, there is a difference.
ACCRUED means INCURRED BUT NOT YET PAID, HENCE THE TERM ACCRUAL.
INCURRED means the right against us is already enforceable, hence the related expense should already be recognized in the books, whether the same is paid or not.
An expense may already be incurred but need not accrued if already paid.
They are definetly different meanings. Actually in modern accounting we are maintaining our books on “accrual basis” contrary to the cash basis. In the dictionary it says that “if money or interest accrues or if it is accrued, it gradually increases in the amount over a period of time. For example “I owed GBP 5.000- part of this was accrued interest”. Or, for example at 31 December 2007, you have not received the electricity invoice for the consumption you made for the month 2007, in accordance with the accrual basis of accounting, you have to accrue the related expense. Such expenses are “accrued” expenses.
Whereas, “incur” means something “happens”. Fore example, huge losses incurred as a result of the slow down in the economy this year.
Hope it clarifies.
Incurred means in layman’s language it is ‘bear”, for eg:’I have to incur the expenditure” instead you can also say “I have to bear the expenditure”. But it is more appropriate to use the “incur” in accounting terminology
Accured means ” accumalation”,
Yes of course, there is a difference between accured and accurate,
Accurate means, precise, correct or right.
Hope this satisfies your querry.
No these are not interchangeable….Incurred may include PAID plus Accrued…………
so far as my undertanding goes both terms are having different meaning and hence different application
it means transaction needs to be recognised as certain event incidental to that transaction has occured. e.g. interest on borrowed capital, it accrues as soon funds are disbursed whether you use the funds or not, whether you pay interest or not, whether you get intimation for recovery or not.
action followed on account of a decision to do so. you incur expenditure. e.g. when you pay salaries you call you have incurred salary cost, you pay travelling exp. you have incurred travelling cost. these are all examples of incurring expenditure normally we use earned profits and suffered losses. we may use incur losses if you decide to perform even on a loss making proposition or recession etc. where you know your margins are shrinking but still you go on. there one can use term “incur” for losses. Becuse it is a result of your decision to go ahead with the transaction
i hope that clarifies the matter
I was reading the responses to your query and I found the response of Milliard Souers to have hit the eye of the question.
I was thinking along that line but could not find the appropriate words. Thanks to Milliard
Whatever you have mentioned two words meaning are different:
Accrued-Collect or receive payment or benefits.