Post Accruals¶

Accrual accounting requires recognizing expenses in the period they are incurred, regardless of when the invoice arrives or payment is made. Credence facilitates this for recurring vendor charges by calculating the appropriate expense and liability entries each accounting period.

Key Concepts¶

• Vendor charge: A recurring contract expense (e.g., monthly insurance, property management fees) defined as part of a vendor contract.
• Accrual account: The liability account that accumulates the recognized expense until the invoice is paid. Configured on the vendor charge.
• Expense account: The income-statement account that records the expense. Configured on the vendor charge.
• Prepaid account: A property-level asset account used when a vendor has been paid before the expense period arrives.
• Accounting period: The month (YYYY-MM) for which you are posting accruals.

How Accrual Posting Works¶

Eligible Vendor Charges¶

Credence includes a vendor charge in the accrual run when all of the following are true:

• The charge has a payment schedule defined
• Both an expense account and an accrual account are assigned
• The vendor contract is active
• The charge's date range overlaps the selected accounting period

Calculation¶

For each eligible vendor charge, Credence calculates the amount to recognize in the current period:

Incremental Accrual Amount = Unaccrued Budget × (Period Fraction ÷ Remaining Months)

Where:

• Unaccrued Budget = Total charge budget − Amount already accrued − Approved invoices received to date (floors at zero)
• Period Fraction = Portion of the selected month covered by the vendor charge (e.g., 0.5 if the charge starts mid-month)
• Remaining Months = Total months from the selected period start through the charge's end date

Example: A 12-month insurance contract totalling $12,000 with $0 accrued and no invoices yet. In month 1 of 12 with a full-month period fraction: Incremental Accrual = $12,000 × (1 ÷ 12) = $1,000

If the vendor has been prepaid, a Prepaid Offset is also calculated and included in the expense entry, drawing down the prepaid asset balance over the remaining periods.

Ledger Entries Created¶

Each posted accrual creates a bundle with up to three ledger entries:

Posting Process¶

1. Select the accounting period for the accrual run.
2. Credence previews the proposed amounts for all eligible vendor charges, including any warnings or errors.
3. Review the proposed entries. You can draft them first (for further review) or post and approve them immediately.
4. Posted accruals are locked for the period — Credence will not allow a second accrual for the same vendor charge and period.

Unwinding Accruals When an Invoice Is Approved¶

When an invoice (payable) tied to an accrual vendor charge is approved, Credence automatically unwinds the corresponding accrual liability. The approval entry debits the accrual account (reducing the liability) and credits the payable account, with any excess invoice amount going to the prepaid account if the vendor was paid ahead of accrual.

Edge Cases & Notes¶

• Missing prior periods: Credence requires all prior periods to have accrual bundles before posting a new period. This prevents gaps that would distort the cumulative liability balance. If prior periods are missing, post those first.
• Already posted: Each vendor charge can only have one accrual bundle per period. If a bundle already exists, the charge will show an error and be excluded from the current run.
• Over-accrual: If approved invoices exceed the charge budget, the incremental accrual amount may go negative. Credence warns you and floors the amount at zero — manual adjustment may be needed.
• Manual accrual bundles: If accrual entries were posted manually (not through this workflow) against the same accrual account, Credence warns you because those entries are not factored into the automatic calculation.
• No remaining periods: Once the vendor charge end date has passed and all periods are accrued, the charge is excluded from future runs.