Accruals and deferrals (periodisering)

Accruals and deferrals (periodisering) means that income and expenses are recorded in the period they actually relate to, regardless of when the invoice is sent or the money is paid. Rent paid in December for January should be charged to January, and an insurance premium paid for a whole year is spread over twelve months.

The aim is for each period to show a true and fair result. Without accruals and deferrals, a single large invoice could make one month look like a disaster and the next like a success.

Common accrual and deferral items are prepaid expenses, accrued expenses, deferred income and accrued income. They stay on the balance sheet until the period they relate to has ended. Smaller amounts may be expensed directly under the simplification rules in K2.