Thank for this content. I started as an accounting major but ended up switching with a degree in Bus Mgmt. Have always wanted to get into a career in Accounting. Landed a series of jobs from collections and accounts payable for 15 years and finally landed the perfect job as an Accounting Analyst. Your controller academy and accounting interview tips helped prepare me with the courage and confidence to even apply for the position. I'm a big fan and grateful for you sharing your understanding of Accounting. We appreciate you for it!
Clarifying Accounts Payable vs Accrued Expenses for Accountants **2. Summary:** This video aims to clear up confusion between accounts payable and accrued expenses for accountants entering the field. The content covers the definitions of accounts payable and accrued expenses, their placement on financial statements, and the recording process. Real examples with numerical data illustrate how to record accrued expenses, specifically focusing on vacation accruals. **3. Key Highlights:** - **Accounts Payable:** Represents amounts recorded from vendor invoices for goods and services; recorded when a vendor invoice is received, and payment is pending. - **Accrued Expenses:** Obligations to pay in the near future, recorded to comply with accrual accounting; includes vendor invoices not yet approved or received and compensation accruals like vacation balances. - **Location on Financial Statements:** Accounts payable and accrued expenses are found on the income statement under various elements and under current liabilities on the balance sheet. - **Recording Process:** Demonstrates how to record accounts payable using an example invoice and explains the accrual process, particularly for vacation accruals, providing a downloadable Excel file for further understanding.
**4. Conclusion/Key Takeaways:** Understanding the distinctions between accounts payable and accrued expenses is crucial for accurate financial reporting. The video emphasizes the importance of adhering to accrual accounting, especially for businesses exceeding a million dollars in revenue, and provides practical examples for recording accrued expenses like vacation liabilities. **5. Purport:** This video serves as a comprehensive guide for accountants, offering clarity on distinguishing between accounts payable and accrued expenses. By providing real examples and practical insights, it aids in the proper recording and understanding of these concepts, facilitating more accurate financial reporting.
Super clear. What’s super confusing are automatic journal reversals! Takes me forever to analyze what the actual incremental expense was in the month 😅
It would be nice if you make a video about what is expected of a junior accountant from your perspective as a controller. I have some experience in accounting, but I still feel like lacking in the know how.
Thank you for clarifying this two types of accounts and going down into detail on the accrue one. I'm currently at my fourth year of collage and doing my acconting practices and this content has been of great help.
You’re not gonna see an expense in the marketing category (if you have a marketing and advertising account on the general ledger) if you put it in prepaid expenses, so how do you break it out so that it’s reflecting correctly on the income statement? What’s the purpose of putting it in prepaid expenses if it’s not gonna give you the right account for analysis down the road?
If the invoice should be registered as part of both G&M and S&M, how do you technically do it in quickbooks? In addition, do you treat all invoices by default as accrued, unless it is approved?
Vacation Expense impact on the Income Statement shows a huge variance between Jan and Feb. Would it be prudent to take an average of the previous year, and factor in expected staff turnover in the current year, to expense a lower value in Jan? Would this not ensure that your Net Profit is more consistent on a month-to-month basis over the financial period?
Can you make a video on cash flow projections cash flow forecasts and cash projections ? Another video I was looking for was on gl account reconciliations, usually done on balance sheet accounts in excel? Thank you so much!
Hi, I have a doubt please between "Normal" Budgeting and Financial Modeling. I have seen many times that, in a "Financial Modeling" (usually used for valuation, M&A, Strategic Planning, and similars) there are NOT calculated things as costs of the products, raw materials, direct and indirect materials, direct and indirect labor, planned level of production, etc., all in a depth "level of detail" as, for example, in a "Normal" Budgeting. Am I right? Or not? I mean, it is, or not necessary to "includes" in a "Financial Modeling" the level of detail and calculations like costs, production, etc? And why or why not? What is the difference between a a "Financial Modeling" and a "Normal" Budget process? Are the times? (1, 2, 3, N years) What are used for? What more? If I do a Business Plan, do I need a “normal” and detailed budget, or a a Financial Modeling? and for a Strategic Planning? Because both looks forward to the future, and both finish in the three statements (Balance, P&L and Cash Flow), I'm some confused. Thank you in advance for your advice!
Hi Hanna, Could you please make detailed video about PO and different type of PO, 2 way match and 3 way match and complete P2P cycle (from identifying products, Purchase requisition, PO, GRIR, Payment) , further more thanks for your informative videos and I really like your way of explanation and you made accountancy easy by explaining in real time situation.
How do you record an insurance invoice that runs from 1st of April 2024 to the 31st of March 2025. There are two invoices, one for property liability of 10,000 and the other is for Directors liability of 500. Invoice date is as of the 1st of April 2024. But the policy renewal runs from April 2024 to March 2025.
Bill this can be so confusing, sometimes, the way I look at these two is “AP have already received a bill VS Accrued Exp we expect to receive a bill for this”… would you agree with this mindset ?
dear Hanna thanks a lot , please advice why we record the first JE credit side to the account vacation lability and the last JE you credit the accrued vacation liability ? tanks ,
Good day I recently came across your channel. Do you have any videos on understanding and recording revenues? I checked out your courses on your website but I did not locate any with that content. TIA.
I'm confused. Aren't prepaid expenses an asset? Because the company paid in advance for services? and who approved the invoice that you have received but not approved to record it under accrued expenses? What is the difference?
Does the controller academy count towards CPE? I would think if I can get CPE from the earmark app by listening to podcasts that your academy should be able to get set up that way too. Thanks.
Instead of trueing up the vacation liability, couldn’t you also book the accrual as a reversing entry and then reaccrue in full each month? You wouldn’t need to keep track of the running balance for each month with this method.
Ok but what happens when someone uses their vacation and the month-to-month balance is lower? Do I just debit vac. liability and credit vac. expense? This is just a preparation for the case if someone quits, but what happens when they don't? I can't just keep it in expenses, can I? It's weird to NOT explain both scenarios.
Hi Hanna, I am trying in Job in UAE and from last 2 months and given only 2 interviews and 1 interview I got rejected because I have told to interviewer AP and AR reconciliation is part of Balance sheet reconciliation and however in SAP, we have different model for sub ledger like AP, AR. But she told that AP and AR is not balance sheet reconciliation. Could you please clarify about this?
I still find it hard to understand, in theory both are obligations that the company has to pay?the difference could be said that one is a provision like the one shown in the example of the vacations?
my rule is make sure all 30 or 31 days of the month of salaries/tax are recorded, either via recording the actual payroll, or if last check date is Nov 28th, then accrue the 2 last days of salaries/benefits/tax
You’re not gonna see an expense in the marketing category (if you have a marketing and advertising account on the general ledger) if you put it in prepaid expenses, so how do you break it out so that it’s reflecting correctly on the income statement? What’s the purpose of putting it in prepaid expenses if it’s not gonna give you the right account for analysis down the road?
![Eminem - Fuel (feat. JID) [Official Lyric Video]](http://i.ytimg.com/vi/t5H_CewqpKA/mqdefault.jpg)
Thank for this content. I started as an accounting major but ended up switching with a degree in Bus Mgmt. Have always wanted to get into a career in Accounting. Landed a series of jobs from collections and accounts payable for 15 years and finally landed the perfect job as an Accounting Analyst. Your controller academy and accounting interview tips helped prepare me with the courage and confidence to even apply for the position. I'm a big fan and grateful for you sharing your understanding of Accounting. We appreciate you for it!
Thank you so much for the kind words! Interesting background. Keep hustling and it will pay off, that's my experience
You speak for lots of people. Thank you, Bill.
I'm a junior in college, and this helps a lot! Thank you!
Happy to help!
Clarifying Accounts Payable vs Accrued Expenses for Accountants
**2. Summary:**
This video aims to clear up confusion between accounts payable and accrued expenses for accountants entering the field. The content covers the definitions of accounts payable and accrued expenses, their placement on financial statements, and the recording process. Real examples with numerical data illustrate how to record accrued expenses, specifically focusing on vacation accruals.
**3. Key Highlights:**
- **Accounts Payable:** Represents amounts recorded from vendor invoices for goods and services; recorded when a vendor invoice is received, and payment is pending.
- **Accrued Expenses:** Obligations to pay in the near future, recorded to comply with accrual accounting; includes vendor invoices not yet approved or received and compensation accruals like vacation balances.
- **Location on Financial Statements:** Accounts payable and accrued expenses are found on the income statement under various elements and under current liabilities on the balance sheet.
- **Recording Process:** Demonstrates how to record accounts payable using an example invoice and explains the accrual process, particularly for vacation accruals, providing a downloadable Excel file for further understanding.
**4. Conclusion/Key Takeaways:**
Understanding the distinctions between accounts payable and accrued expenses is crucial for accurate financial reporting. The video emphasizes the importance of adhering to accrual accounting, especially for businesses exceeding a million dollars in revenue, and provides practical examples for recording accrued expenses like vacation liabilities.
**5. Purport:**
This video serves as a comprehensive guide for accountants, offering clarity on distinguishing between accounts payable and accrued expenses. By providing real examples and practical insights, it aids in the proper recording and understanding of these concepts, facilitating more accurate financial reporting.
Thank you!
This is a great real work day example! Thanks
You're very welcome!
Super clear. What’s super confusing are automatic journal reversals! Takes me forever to analyze what the actual incremental expense was in the month 😅
good point, I'll show how I do GL analysis in a separate video
@@TheFinancialController 🙏
I'm about to have an interview in 30 min XD, (accountant) I was going thought your videos for the past 3 days, Really helpful. Thank you :)
You are just the Best Bill
thank you!
Another great tutorial. The way you explain the concepts with examples is super helpful. You're the best!
Thank you Bilhana.It’s great work,very understandable.
Thank you Mr. Hanna! I truly appreciate your informative videos, I am learning a lot of good stuff from you! Thx
Thanks so much!
Thank you so much Bill. I got helpful
It would be nice if you make a video about what is expected of a junior accountant from your perspective as a controller. I have some experience in accounting, but I still feel like lacking in the know how.
Thank you for clarifying this two types of accounts and going down into detail on the accrue one. I'm currently at my fourth year of collage and doing my acconting practices and this content has been of great help.
Glad it was helpful!
Thank you so much! I have finally understood! Super clear
Glad it helped!
Thank you Bill for your video. These kind of journal entry are related or similar to reversal mothly provisions?
This really cleared up a lot for me.
Thank Bill Hanna for your helpful videos
You are very welcome
You’re not gonna see an expense in the marketing category (if you have a marketing and advertising account on the general ledger) if you put it in prepaid expenses, so how do you break it out so that it’s reflecting correctly on the income statement? What’s the purpose of putting it in prepaid expenses if it’s not gonna give you the right account for analysis down the road?
If the invoice should be registered as part of both G&M and S&M, how do you technically do it in quickbooks?
In addition, do you treat all invoices by default as accrued, unless it is approved?
Amazing Video. Can you make a video on Accounting for Non-profit Organization
Vacation Expense impact on the Income Statement shows a huge variance between Jan and Feb. Would it be prudent to take an average of the previous year, and factor in expected staff turnover in the current year, to expense a lower value in Jan? Would this not ensure that your Net Profit is more consistent on a month-to-month basis over the financial period?
Thank you so much Bill. I really needed this
Glad it was helpful!
Can you make a video on cash flow projections cash flow forecasts and cash projections ?
Another video I was looking for was on gl account reconciliations, usually done on balance sheet accounts in excel?
Thank you so much!
Hi,
I have a doubt please between "Normal" Budgeting and Financial Modeling.
I have seen many times that, in a "Financial Modeling" (usually used for valuation, M&A, Strategic Planning, and similars) there are NOT calculated things as costs of the products, raw materials, direct and indirect materials, direct and indirect labor, planned level of production, etc., all in a depth "level of detail" as, for example, in a "Normal" Budgeting.
Am I right? Or not?
I mean, it is, or not necessary to "includes" in a "Financial Modeling" the level of detail and calculations like costs, production, etc? And why or why not?
What is the difference between a a "Financial Modeling" and a "Normal" Budget process? Are the times? (1, 2, 3, N years) What are used for? What more?
If I do a Business Plan, do I need a “normal” and detailed budget, or a a Financial Modeling? and for a Strategic Planning?
Because both looks forward to the future, and both finish in the three statements (Balance, P&L and Cash Flow), I'm some confused.
Thank you in advance for your advice!
How about accrued revenue vs. Contingent asset? Following conservatism, how do accountants recognize accrued revenue?
thank you for these videos! love from Ghana
You're so welcome!
Hi Hanna, Could you please make detailed video about PO and different type of PO, 2 way match and 3 way match and complete P2P cycle (from identifying products, Purchase requisition, PO, GRIR, Payment) , further more thanks for your informative videos and I really like your way of explanation and you made accountancy easy by explaining in real time situation.
Thanks for the idea!
How do you record an insurance invoice that runs from 1st of April 2024 to the 31st of March 2025.
There are two invoices, one for property liability of 10,000 and the other is for Directors liability of 500. Invoice date is as of the 1st of April 2024. But the policy renewal runs from April 2024 to March 2025.
Cheers from Mexico! Thank you for the content!
hola Eduardo
Bill this can be so confusing, sometimes, the way I look at these two is “AP have already received a bill VS Accrued Exp we expect to receive a bill for this”… would you agree with this mindset ?
Good one there, thanks for this presentation.
My pleasure!
dear Hanna thanks a lot , please advice why we record the first JE credit side to the account vacation lability and the last JE you credit the accrued vacation liability ?
tanks ,
Hi there, they are the same liability account. I must have added the word Accrued, but basically the same account
Thank you very much
Good day I recently came across your channel. Do you have any videos on understanding and recording revenues? I checked out your courses on your website but I did not locate any with that content.
TIA.
I'm confused. Aren't prepaid expenses an asset? Because the company paid in advance for services? and who approved the invoice that you have received but not approved to record it under accrued expenses? What is the difference?
Can I get Excel sheet for Accrued expense & employees vacation
Does the controller academy count towards CPE? I would think if I can get CPE from the earmark app by listening to podcasts that your academy should be able to get set up that way too. Thanks.
Alan. I am working on this and should be done early 2024
@@TheFinancialController oh man you replied quick. I so love your channel. I’m still in school but I’ll definitely be looking to you once I graduate.
Instead of trueing up the vacation liability, couldn’t you also book the accrual as a reversing entry and then reaccrue in full each month? You wouldn’t need to keep track of the running balance for each month with this method.
You can
great video, loved it thanks! can we have more in depth videos like this and quickbook reference is great too.
Sure thing!
Ok but what happens when someone uses their vacation and the month-to-month balance is lower? Do I just debit vac. liability and credit vac. expense? This is just a preparation for the case if someone quits, but what happens when they don't? I can't just keep it in expenses, can I? It's weird to NOT explain both scenarios.
You are so awesome!! You are very helpful and you saved my career! Thank you!
You are so welcome!
Wonderful content.
Glad you think so!
Why is there two methods short method and long method of closing the Year-end?
Bonus Accrual
The previous company didn’t pay ~ 60 hrs accrued PTO by the time I left. 😩😬
Hi Hanna, I am trying in Job in UAE and from last 2 months and given only 2 interviews and 1 interview I got rejected because I have told to interviewer AP and AR reconciliation is part of Balance sheet reconciliation and however in SAP, we have different model for sub ledger like AP, AR. But she told that AP and AR is not balance sheet reconciliation. Could you please clarify about this?
Strange, you are correct that AP and AR are balance sheet reconciliations
I still find it hard to understand, in theory both are obligations that the company has to pay?the difference could be said that one is a provision like the one shown in the example of the vacations?
correct
@@TheFinancialController Thanks for your answer Bill as always good explanations.
Hey Bill, are you not on LinkedIn?
I am
As a statistic student major tried jump in financial analyst job field. Why you guys like to make something simple so difficult?
Cry about it
What is your Payroll Accural Rule? last check date?
my rule is make sure all 30 or 31 days of the month of salaries/tax are recorded, either via recording the actual payroll, or if last check date is Nov 28th, then accrue the 2 last days of salaries/benefits/tax
hi
🚀🚀
Plzzz Would you like to more Slowly Slowly... I can't understand properly
You’re not gonna see an expense in the marketing category (if you have a marketing and advertising account on the general ledger) if you put it in prepaid expenses, so how do you break it out so that it’s reflecting correctly on the income statement? What’s the purpose of putting it in prepaid expenses if it’s not gonna give you the right account for analysis down the road?