How to record accrued expenses in Xero
How to accrue for costs you've incurred but not yet been billed for in Xero — with the journal, the reversal, and a worked example.
This walkthrough shows Xero users how to record an accrued expense using a two-step auto-reversing manual journal, illustrated with a £450 electricity cost incurred in March but invoiced in April. It helps bookkeepers and finance teams ensure costs hit the correct period on the P&L without double-counting when the real bill arrives.
An accrued expense is a cost you've incurred but haven't yet received a bill for. To show the right profit, you recognise the expense in the period it relates to — even though the invoice arrives later.
The two‑step accrual
Say you know March's electricity was roughly £450 but the bill won't arrive until April.
- Accrue at month‑end (31 March):
- Debit
Electricity£450 (P&L) - Credit
2100 Accruals£450 (balance sheet liability)
- Debit
- Reverse when the bill arrives (April): post the reversal, then enter the actual supplier bill as normal. If the real bill is £470, only the £20 difference lands in April — March already carried its fair share.
Why reverse?
Reversing prevents double‑counting: without it, both the accrual and the real invoice would hit the P&L. Most teams post accruals as auto‑reversing journals dated the first of the next month.
Worked example
| Date | Entry | P&L impact |
|---|---|---|
| 31 Mar | Accrue estimate | £450 in March |
| 1 Apr | Reverse accrual | −£450 in April |
| 15 Apr | Actual bill £470 | £470 in April |
| Net April | £20 |
Do it automatically
WorkWithLottie spots recurring suppliers, proposes the accrual when a bill is late, and posts auto‑reversing journals — so nothing slips through the month‑end cracks.
Related: What is an accrual? · Accruals vs prepayments
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ReadLet Lottie handle this for you
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