If an accrual is made, what type of account will it be reflected as in the Statement of Profit and Loss (SPL)?

When an accrual is made, it is recognized as an expense in the Statement of Profit and Loss (SPL). Accrual accounting operates on the principle that expenses should be recognized in the period they are incurred, regardless of when the cash payment is made. This matches expenses with the revenues they help generate, maintaining the integrity of financial reporting.

Hence, if a company incurs an expense but has not yet paid for it, an accrual is recorded. This entry reflects the obligation to pay in the future while ensuring that the expense is recognized in the current accounting period. Thus, it directly impacts net income by decreasing it, and is shown as an expense in the SPL for better representation of the company’s financial performance during that particular period.

While liabilities may also be affected since an accrual indicates a future obligation, the immediate impact in the SPL is reflected as an expense, aligning with the accrual accounting principle.