The accrued amount is linked to a contracted right that has not yet been collected.
Devengado is a term that comes from the verb devengar , whose etymological root is found in the Latin word vindicāre (translated as “to appropriate” ). The action of accruing refers to contracting the right to receive some remuneration for providing a service, developing a job or some other title.
The idea of accrual , in this framework, refers to the act of accruing or the amount accrued. For example: “The accrued rate will bring several million pesos to the national government” , “It was agreed that the payment will be accrued on the 10th of each month” , “The tax must be calculated based on what was accrued during the last fiscal period” .
What is accrual
It can be said that an accrual is a contracted right that has not yet been collected, or an acquired obligation that has not yet been paid. The accrual principle , for its part, establishes that the income or expense arises at the moment of the commitment , increasing or reducing the equity at that time for accounting purposes.
As a principle, therefore, accruals imply that operations must be recorded when the economic event that produces them takes place , regardless of whether it has been collected, invoiced or contracted. Suppose a company hires a worker who works in April, and pays him his salary at the beginning of May. The company , according to the accrual principle, must record the accrual of the expense as a result of the month of April, without taking into account whether the employee was paid in May.
The accrual principle, in short, establishes that profits and losses must be recognized over time , regardless of whether they have been collected or paid. Recording what is gained or lost at the time of collection or payment represents an error from accounting criteria.
The accrual principle establishes that an operation must be recorded when the economic event that generates it occurs.
How to allocate income and expenses
In other words, the accrual principle provides us with a criterion to allocate expenses and income temporarily, according to the actual flow of services and goods, instead of taking into account the monetary flows that are generated. When applying this to accounting, we obtain a series of more relevant and precise data than through the cash principle, which is defined below.
First of all, it is important to note that the accrual principle and the cash principle are two methods that companies use for their management, for the recognition of their income and expenses. As established by the cash principle , these two movements must be attributed according to the monetary flow , a concept that is also known as monetary flow and which refers to the flow of money that begins with the payment that consumers make. to companies for the goods and services they provide and ends when the workers receive it.
Using the cash principle, therefore, income and expenses are only recognized once the money comes in or goes out, respectively, regardless of when the good or service was provided. This criterion is applied, for example, in the payment system for public services, such as the provision of electricity: when we pay a bill, the expense is associated with that moment and not with the operation that is documented in the document itself. .
There is the concept of accrued expense , which refers to that which has been made but has not yet been paid, and in this way it is understood what we make of the electricity that we receive from the supplier company before paying for it.