In compliance with Generally Accepted Accounting Principles (GAAP), goods and services must be recorded in the year they were received or performed and income must be recorded in the same year as the expenses that generated the income. The 100000D Accrual Deferral journal is used to make these adjustments.

Our ledgers at year end represent part of the University of California’s financial standing at that point in time. If goods or services have been received on or before June 30 and have not been recorded in the ledgers as an expense it represents an unrecorded liability. In the fiscal close certification letter, deans, chairs and business officers certify that there are no material unrecorded liabilities.

The cost (either from the invoice or an estimate from the purchase order or the vendor) of goods and services equal to or over $10,000 received on or before June 30 of the current year must be recorded in the ledger as an expense, not just as an encumbrance. Goods and services supplied to external customers by June 30 of the current year where the invoice is equal to or greater than $10,000 and were not recorded in the current year ledgers must be accrued. Departments may accrue or defer items under $10,000, but should not accrue or defer anything under $2,500.

Accruals: Accrued Expense

Accrued Expense is used when goods or services are received this fiscal year and will be paid for next fiscal year. This is required for items of $10,000 or more, optional for items $2,500 or more, and should not be done for items under $2,500. 

For Accrued Expenses:
Use journal category 100000D Accrual Deferral Journal , selecting the appropriate Entity, Fund, Department, Purpose, Program and Activity. For (Natural) Account:
► Debit the appropriate 5XXXXX Expense type
► Credit 237600 - Other Accrued Expenses

Examples:

► You received delivery of a $3,000 computer on June 29 and the invoice won't post until July's fiscal period begins (i.e., the fourth business day in July).
► Sub-contract on contract and grant has rendered service for four months of the current fiscal year but invoice will not be sent until several months into the next fiscal year.
► Consulting work on web page design completed June 15 and the invoice posts August 20.

 

Encumbrances vs Accrued Expense

Encumbrances are used to record obligations for goods and services which will be provided in future fiscal periods. If the goods have been received or the service completed as of June 30, and the invoice will not be processed until the next fiscal year, the expenses must be accrued (if over $10,000) in the General Ledger by using the 100000D Accrual Deferral Journal.

Capitalized Equipment and Leased Space

Capitalized equipment at or above $5,000 and space leases will be accrued by Capital Asset Accounting and do not need to be accrued by campus departments.

Accruals: Accrued Revenue (Income)

Accrued income is used when goods or services are provided to a customer in the current fiscal year but are not billed for until the following fiscal year. This is required for items of $10,000 or more, optional for items $2,500 or more, and should not be done for items under $2,500.

Do not accrue for interdepartmental billings such as any goods/service charged through an IB document or feed.

For Accrued Revenue
Use journal category 100000D Accrual Deferral Journal, selecting the appropriate Entity, Fund, Department, Purpose, Program and Activity. For (Natural) Account:
► Credit the appropriate 4XXXXXX Revenue Type
► Debit 129002 Other Receivables

Examples: 
► The normal practice in your self-supporting fund is to invoice a month after the services are rendered. This means consulting services provided in June of one fiscal year are invoiced after that year's fiscal close and post in July of the next fiscal year.
► In July of one fiscal year, you received registration fees for a conference held in June of the prior fiscal year.
 

Deferrals: Deferred Expense (Prepaid Expenses)

Used when the expense for goods or services has been paid for in advance (i.e., in the current fiscal year) and the activity won't take place until the following fiscal year. The invoice was posted to one fiscal year for goods/services that were not received until the following fiscal year. This is required for items of $10,000 or more, optional for items $2,500 or more, and should not be done for items under $2,500.

For Deferred Expenses:
Use journal category 100000D Accrual Deferral Journal , selecting the appropriate Entity, Fund, Department, Purpose, Program and Activity. For (Natural) Account:
► Credit the appropriate 5XXXXX Expense type
► Debit 140003 – Prepaid Maintenance and Svc Contracts or 140004 - Other Prepaid Expenses

Examples:
► You paid registration fees that posted to the ledger in one fiscal year, but that are for a conference that will take place in the following fiscal year.
► Catering services for an event in July of next fiscal year required advance payment this June.
► Books or software ordered using the Procurement Card in June are not received until July.

Important Notes:
► Use the Accounting Period called Close.
► Must include the date the goods/services were received, vendor name, purchase order number or invoice number. Include the date of the intended activity in the Explanation field.
► You do not need more than one line for the Deferral account.
► The reversal will result in a debit to expense, appropriately moving recognition of the expense to the correct fiscal year.
 

Deferrals: Deferred Revenue (Income)

Used when income is received this fiscal year for services or goods to be provided next fiscal year. This is required for items of $10,000 or more, optional for items $2,500 or more, and should not be done for items under $2,500.

For Deferred Revenue 
Use journal category 100000D Accrual Deferral Journal , selecting the appropriate Entity, Fund, Department, Purpose, Program and Activity. For (Natural) Account:
► Debit the appropriate 4XXXXX Revenue Type
► Credit 223000 - Other Unearned Revenue

Examples:
► Tuition received in June for the upcoming fall quarter.
► Registration fees received in June for a conference held the following month.

Important Notes:
► Income received (CR - Cash Receipt or CCR - Credit Card Receipt document entered) this fiscal year.
► Use the Accounting Period called Close.
► Must include the date the income was received, and date(s) of the event in the Explanation field.
► You do not need more than one line for the Deferral account.
► The reversal will result in a debit to expense, appropriately moving recognition of the expense to the correct fiscal year.