How Do You Record Expenses Before the Invoice Arrives?

Start with work completed or services received by the closing date. An unbilled maintenance visit, electricity consumed or an outsourced service already delivered may need review. A purchase order alone does not establish that an expense has been incurred.

Ask the person responsible for the purchase what was actually received. Keep future work separate. If a contract covers several periods, identify the part relating to the period being closed. Do not accrue the whole contract merely because it has been signed.

Use one row for each identifiable obligation. Give it a reference that follows the item from the estimate through to the supplier invoice. The following fields make the proposed entry easier to check.

Keep the evidence with the schedule. Someone reviewing the entry should be able to follow the calculation without asking the preparer to reconstruct it from memory.

• ✓An agreed contract, quotation or purchase order showing the scope and price.
• ✓A signed service report, accepted timesheet or confirmation from the person who received the service.
• ✓A supplier statement or written confirmation identifying completed but unbilled work.
• ✓Usage records and an agreed tariff for a consumption-based service.
• ✓A previous invoice for a recurring service, checked against current scope, usage and pricing.

Use these records together. A quotation supports the price; a service report supports completion. If the only evidence is a department estimate, record who supplied it, their basis and what remains unconfirmed. Flag weak support for the reviewer instead of presenting the amount as certain.

Prefer a calculation someone else can repeat: accepted hours multiplied by the agreed rate, completed visits multiplied by the contract price, or measured consumption multiplied by the applicable tariff. Explain any allocation between periods.

Use a previous bill only after checking whether anything changed. Record extra work, price revisions, service interruptions and uncertain quantities separately. Avoid adding an unexplained buffer. Where the amount or obligation is disputed, ask the reviewer to resolve the accounting treatment rather than forcing a convenient figure into the schedule.

State whether the estimate includes tax and leave tax questions visible. An internal accrual schedule does not itself establish eligibility for GST input tax credit; prescribed documents and other conditions apply. Check the current position on the official GST information portal or with your CA.

As a practical control, have the person responsible for the service confirm receipt and someone other than the preparer review the calculation. In a small business, the owner and accountant can divide these checks. Record their approval against the actual version posted.

• ✓Confirm that the service belongs to the period being closed.
• ✓Check evidence, arithmetic, account classification and assumptions.
• ✓Search supplier bills and existing journals for a duplicate.
• ✓Check whether an earlier accrual already covers the same work.
• ✓Agree who will obtain the invoice and clear the balance.
• ✓Approve the entry or return it with a specific question.

After posting, reconcile the schedule total to the accrued-expense ledger. Explain every difference, including manual journals outside the schedule. Keep unresolved items assigned to someone.

Illustrative example only: a workshop receives a maintenance service before its reporting period ends. The accepted service report and agreed price support an estimate of Rs 18,000. The invoice later confirms Rs 18,600. These figures exclude tax solely to show the accrual mechanics.

The reversal and invoice together leave Rs 600 of additional expense in the next period. Investigate that difference and attach the explanation. If the invoice arrives before the earlier accounts are finalised, ask whether the earlier estimate should be updated. Do not assume every difference belongs in the next period.

Choose a method with your accountant. Under the reversal method, reverse the estimate and book the invoice normally. If the invoice is still missing at the next close, reassess and rebook the amount still owed. An automatic reversal should not make a continuing obligation disappear from the next closing review.

Alternatively, leave the accrual open and clear it directly when booking the invoice: debit the accrued liability for the supported amount, record any difference in the appropriate account and credit the supplier payable. Do not also reverse that same accrual. For partial invoices, clear only the covered portion and support the remaining balance.

Keep the invoice reference, clearance journal and reason for any difference on the original schedule row. Use the supplier payment run guide for the later payment process and the monthly bank reconciliation guide to check payments against bank records. Neither payment nor bank reconciliation replaces this accrual check.

• Accruing future purchases merely because someone approved the budget.
• Copying the previous estimate without checking whether the service continues.
• Booking the invoice as an extra expense while leaving the original accrual untouched.
• Clearing a whole accrual against an invoice covering only part of the work.
• Deleting an old balance without evidence that it is no longer owed.
• Treating accounting recognition as proof of tax deductibility or GST credit eligibility.

Make the schedule part of the closing routine described in the finance operations guides. Review open items each close, follow up missing invoices and retain the explanation for every adjustment. The useful result is a traceable balance, not simply a spreadsheet with no empty cells.