Prepayments and accruals calculator

How to use the calculator

Choose Prepayment for a cost paid or recorded in advance of the service being used. Choose Accrued expense for a service already received whose bill has not yet been recorded. The result gives the required asset or liability at your reporting date, then compares it with the balance already posted for that item.

New to these terms? Our beginner’s guide to prepayments and accruals explains them with examples, including what debit and credit mean.

1. Enter the cost of the whole service period, excluding recoverable VAT. Include irrecoverable VAT in the cost.
2. Use the first and last dates covered by the service. For a subscription, use the subscription period rather than the invoice date.
3. Choose your month-end or year-end reporting date. That day is included in the expense recognised.
4. Enter the existing prepayment or accrual balance for this item. Use £0 only when there is no balance already recorded.
5. Check the adjusting journal and choose Export calculation. Download a spreadsheet schedule, a journal CSV for Xero or QuickBooks Online, or a blank Ledger import template. Keep the bill, contract or estimate with your working paper.

For a prepayment, the journal assumes the full cost was originally charged to expense. If the original posting went directly to the prepayment asset, enter its remaining balance in the existing-balance field. For an accrual, the whole cost must still be unbilled and unposted, apart from the accrual entered. A partly invoiced contract needs a separate calculation for its unbilled portion.

The calculation and rounding method

The tool spreads the cost evenly over the actual number of calendar days in the service period. It counts both service dates and includes the reporting date in the elapsed days. Leap days are included. A reporting date before the service starts gives no expense to date; a date after it ends gives the full expense.

Expense to date = total service cost × elapsed service days ÷ total service days. The prepayment asset is the unused cost. The accrued expense liability is the cost incurred to date, assuming it remains unbilled. The adjusting journal is the difference between that required balance and the existing balance you enter.

For example, £3,650 covering 1 January to 31 December 2026 costs £10 a day. At 31 March, 90 days have elapsed: £900 is expense to date and £2,750 is unexpired. With no existing prepayment, debit prepayments and credit the expense by £2,750.

Each cumulative allocation is rounded to the nearest penny, with half-pennies rounded up. Monthly charges are the difference between consecutive cumulative totals, so they add back to the original cost exactly. A month can therefore differ by a penny from a separately rounded daily calculation.

This is a daily straight-line allocation. It does not model usage-based charges, staged delivery or a firm's equal-monthly policy. Use the method appropriate to the service and apply your accounting policy consistently. For the accounting principle, see ACCA's explanation of accruals and prepayments.

What the schedule tells you

The monthly table covers the entire service period, including future months. “Cost still to use” is the part of the service not yet used at each month-end. In accrual mode, it is not a liability: the liability relates to the service already received. The CSV calls the unused part “Unexpired cost”. It also shows cumulative expense, your reporting-date assumptions and the proposed adjustment.

“Expense to date” starts at the service start date, so it can include previous financial years. It is not automatically the expense for the current month or year. To find a period's expense, compare cumulative expense at its opening and closing dates.

The tool calculates one item at a time, for periods up to ten years. It does not post entries, calculate VAT or decide whether a cost is large enough to need a separate adjustment. If a bill arrives, a contract is cancelled or the estimate changes, update the supporting records before reusing the schedule.

For the original entries, monthly releases and what happens when a bill arrives, read our prepayments and accruals worked examples. For other calculations, browse the free tools. To see how this connects to your books, read how Briefcase handles prepayments and how it handles accrued expenses.