Is it a best practice to determine the accounting period based on invoice date instead of service period? If I understand the correctly, we would need to setup a reversing accrual for regular expenses. Is that correct?


We assume by "accounting period" you are referring to what period you should charge the expense on the invoice. If your company follows Generally Accepted Accounting Principles (GAAP), then you are required to record the expense in the period the service was provided or when the material was received (transfer of title of ownership). The matching principle in GAAP requires this type of approach. So an invoice date is not the driver of which period the expense should be recorded. For example, if your company had a service technician come out to repair equipment on 8/29 and they invoiced you a week later using an invoice date of 9/4, then GAAP accounting requires you to accrue the amount of the repair cost in the accounting period ending 8/31. In the September accounting period you would reverse the accrual and enter the invoice. If your question is asking how most people calculate the time to pay, then our disbursement study may be helpful in this situation. In most cases companies use an invoice date as the start date for the time to measure the payment date.

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