Certain expenses may have been incurred during the financial year, but will only be paid in the next financial year. Examples of such expenses is where accounts or invoices have been received for accounting fees, advertising, rent, rates and taxes, water and electricity, etc., which is applicable to the financial year but which is not yet paid at the end of the financial year.

The expense account must be adjusted so that the expense account represents the expenses for the full financial year or 12 consecutive months (accounting periods or reporting periods). The amount by which the expense account is outstanding will increase the amount of the expense at the end of the financial year. At the end of the financial year a liability is created - Accrued or outstanding expenses because the amount of the expense is consumed or used but not yet paid. It is owed to the party who has supplied the expense item, which is already used up in the financial year.

To Identify, Enter the Transaction and to Post the Transaction to the Ledger:

For example, when analysing the figures on the pre-adjustment trial balance, it is discovered that the telephone expenses paid for the current financial year is R(£) 3 300. The telephone account for R(£) 300 of the last month of the financial year is received, but not yet paid.
Enter the transaction in the General Journal. Press the key on your keyboard or click on the speed button or icon. The Batch Type selection screen will be displayed.
Select the General journal Batch Type and click on the button. The General journal Batch Entry screen will be displayed. If the correct contra account for the batch was not displayed on the Batch Type selection screen, press the key on your keyboard or click on the speed button or icon to set the options for this batch. Note that it is recommended that the Amount Entry field be set to allow both (debit and credit).
Enter the transaction in the batch. After entering the transactions in the general journal, the transactions is as follows:


Click on the speed button or icon or press the key on your keyboard. Select the change the alias option.
Click on the speed button or icon or press the key on your keyboard to post the transactions to the ledger. After posting the transactions to the ledger, the entries should reflect as follows in the ledger.


The expense for the telephone is recognised and recorded in the expense accounts which will result that the net profit will be decreased by the expense of R(£) 300, which is not yet paid as at the end of the financial year (29 February). It has also increased the current liabilities, as it is an expense which is payable in the new financial year. An amount of R 3 600 will be recognised as an expense and not R(£) 3 300.

 The amount that should have been paid for the financial year is the amount on the pre-adjustment trail balance plus the amount of the outstanding expense not yet paid. The expenses are increased (debited) and current liabilities are increased (credited).

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Once these transactions have been processed and you have done the Year-end process in the Tools - Global Processes - Do Year-end menu option, you need to reverse these adjustments in the new financial year. The reason for this is that these adjustments have served its purpose in the old financial year to assist you to generate the correct final financial statements.