Budget principles for Junior Controllers in Norway — Accrual — Part 3

Accrual/Periodesering:
When we prepare a budget, we must remember that the budget must be accrued in 12 months. This will help make it easier for units to follow up on budgets every month (non-conformance reporting).

The budget must align with when expenses and income are paid/paid in. A generally good accrual will contribute positively to managing the organization’s finances. Inadequate accruals can lead to accrual differences being used as an explanation in the reporting without the actual reason being revealed — for example, the planned activity which would have an economic impact is delayed, or the budget can be simply wrong.

What should be accrued? All expenses and income

Annual accruals are generally required for goods and services you sell or buy at the end of the year. Then you must include all purchases and sales invoiced in advance or in arrears.

Typical examples of accrued income and expenses are depreciation, office rent, insurance, interest, accounts receivable, inventories, and salaries if you have employees.

The advantage of accruing each month is constantly having updated reports in your accounts. You can compare them with your budgets and thus keep your business on track.

Here are some more examples that should be accrued:

• goods or services you provided last year but which you invoice for this year
• goods or services you invoiced last year but delivered this year
• purchases you registered this year, but where you received goods or services last year
• purchases you wrote last year, but you get goods or services this year

How it would look like this:

From the left side, you will have a column with accounts and accounts description. On the upper side of your table, you will have the period definition Jan. — Des. or 1 to 12, representing the year you are budgeting for.

For each expense and income, you will record a correspondent realistic amount in each period (only when you expect those expenses and income to appear. If there are no expenses and income expected at some period, that cell should stay black).

Don'tRemember to double-check your numbers with numbers from a previous period/year to see if they make any sense. If there were no significant changes within the organization or accounting regulations, your numbers should yield little.