The accrual method is used in accounting for the expenditures or expenses of all accounts.

Agencies establish liabilities at the end of each accounting period for the following items by account, appropriation, program, object, and sub-object:

• Utilities - Actual based on vendor invoices, or estimate based on past experience.

• Rentals - Actual based on lease agreements.

• Travel Expenses - Actual based on travel vouchers, or estimate based on past experience or prior approval of travel.

• Payroll Taxes - Actual based on actual payrolls, or estimate based upon prior pay period.

• Salaries and Wages - Actual based on time records, or estimate based upon prior pay period. When accruing salaries and wages, agencies are to also accrue the associated number of Full-Time Equivalent (FTE) staff months.

A Journal Voucher (A7-A) or other authorized source document is to be prepared to record liabilities. Refer to Subsection 85.85.15 for an illustrative entry.

Liabilities are to be recorded based on the best available information. If the amount of the accrual is known (i.e., the invoice has been received or the amount is otherwise known), the entry is to be made to GL Code 6505 "Accrued Expenditures/Expenses." With prior written approval from the OFM Accounting Division (refer to SAAM 1.10.50), non-AFRS warrant producing agencies can use alternate coding for recording Expenditures/Expenses.

At the end of the expenditure authority period, if the amount is not known, but can be reasonably estimated following the procedures for determining accounting estimates at Subsection 90.20.55, the entry is to be made to GL Code 6560 "Estimated Accrued Expenditures/Expenses." Refer to Subsection 90.30.50.b and d for illustrative entries.

The payment of liabilities is to be recorded separately from the accrual (or establishment) of liabilities to allow for proper financial reporting, as required by GASB Statement 34.

Each accrual transaction is to be supported by complete documentation. The use of "dummy" or projected accruals as a method to avoid transfers to reserve or circumvent the allotment process is an improper application of accrual accounting and is not to be practiced.

Amounts owed on open account for the purchase of goods or services are recorded in GL Code 5111 "Accounts Payable." The recording of an account payable represents an acknowledgment on the part of the agency that the goods or services have been received and that an actual liability which must be liquidated at a future date exists. Amounts due to other accounts, other agencies or other governments are not reported in this GL code. Such amounts are reported separately in the GL Code 515X Series.

Governmental Funds, which are required to use the modified accrual basis of accounting, record deferred revenue (GL Codes 5192 and 5292) when one of two criteria is met:

• Revenues are not yet earned, or
• Cash is not available.

Generally cash is considered unavailable if it will not be collected within 12 months.

Examples of revenues not yet earned include:

• Advance payments,
• Prepayments made pursuant to agreements,
• Federal loan program advances,
• Insurance premiums billed in advance, and
• Prepaid tuition and fees (summer school).

Examples of cash not available include:

• Receivables that will not be collected within the next 12 months, and
• Contracts for the harvest of timber that extend beyond 12 months.

Proprietary funds, required to use the full accrual basis of accounting, record deferred revenue (GL Codes 5192 and 5292) only when revenue is not yet earned (examples list above).

Refer to Subsection 85.85.25 for an illustrative entry.

Amounts due within the next year on long-term obligations are classified as short-term liabilities.

Refer to Subsection 85.85.22 for an illustrative entry.