Year End Accrual Process

Year End Accrual Process NMSU reports expenses under a modified accrual basis of Accounting. Recording an accrual ensures that the expense is recognized in the fiscal year when it was incurred, rather than when it was paid or when the invoice was received. Accruals are done in order to provide a more accurate view of the University’s financial position at the end of an accounting period. For an expense to be recorded in the current fiscal year, goods should have been received or services provided by June 30. NMSU reviews encumbrance amounts greater than $10,000 for determination of accrual amounts. This procedure exists to ensure adherence with Generally Accepted Accounting Principles (GAAP) and other regulatory requirements, to promote consistent accounting treatment across NMSU, and to ensure financial amounts are not misstated as a result of expenses unrecorded or recorded improperly. 1. Understand accrual rules for expense recognition. Accrual accounting rules require NMSU to record expenses when they are incurred, meaning when the goods are received or the services are provided, whether or not an invoice has been received or payment has been made. Annual accrual training is to be provided by Accounting and Financial Reporting. 2. Maintain appropriate supporting documentation. Department must maintain documentation supporting accrual expense transactions. The checklist (Attachment A) must be completed and kept in a file. Documentation must identify the nature of the goods or services received, the date the goods or services were received, and written documentation from the vendor of the anticipated invoice amount. 3. Review and reconcile balances. Submitted accrual amounts must be reviewed for accuracy prior to submitting to AFR for entry. Confirm that the invoice has not been paid in Banner. Responsibilities Supervisors Supervisors are responsible for ensuring that department units abide by these policies and procedures. Department Business Office The department business office must work closely with department staff to ensure appropriate written documentation is requested from the vendor. The business office is responsible for reviewing accrual amounts, maintaining accrual documentation, and following up on invoices received during first 90 days of new fiscal year. Accounting and Financial Reporting Accounting and Financial Reporting will be responsible for sending out encumbrance reports for items with an encumbrance of greater than $10,000 to departments for their review and determination of accrual amounts. The encumbrance reports will be sent to the departments prior to the end of the fiscal year. AFR will be responsible for processing the accruals in the BANNER system and for processing reverse entries. Annual accrual training is to be provided by Accounting and Financial Reporting. Any current year (service rendered by 6/30/xx) invoices over $10,000 received by A/P before the Controllers close, but paid in the new fiscal year will be accrued in Banner. AFR will inform the department of the expense to be accrued. Accounts Payable (Three-Way match accrual) Accounts payable ensures accruals are entered in the BANNER system for goods received by June 30. Department will provide assistance as needed. Attachment A File Documentation Expense Accrual Documentation Checklist for File: o Nature of Services received o Date services received o Written documentation from vendor with bill amount for services provided and not yet paid prior to June 30 o Signature of department staff responsible for final review of accrual amount prior to submission to AFR .

Load more