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General Information on Accrual Journal Entries
McGill, as with other Canadian universities, must use GAAP (Generally Accepted Accounting Principles) to help guide how we align revenues and expenditures, and to ensure the University’s financial statements reflect the results of operations accurately.
Revenue Recognition Principle:
Income is recorded at the time it is earned (i.e. upon the performing of service or delivery of goods). If income has not been earned, but payment has been received, the amount is deferred to a liability until service is rendered or goods are delivered. The determining factor to record a transaction in a particular period is the economic event when ownership is transferred (e.g. when the customer takes possession of the good or when the service is performed).
The Matching Principle:
The costs incurred in any accounting period should be matched against the revenue generated in the same period for financial reporting purposes. This is the fundamental concept of accrual based accounting. Economic events are recognized at the time the transaction occurs rather than when the payment is made or received. This differs from cash basis accounting which recognizes income when received and expenditures when paid.
Accrual entries also include recording deferrals when external revenue is unearned or external expenses are prepaid. We must ensure that since the Statement of Revenues and Expenses represents a period in time (a fiscal year) that the amounts recorded in the accounts are reflective of the activities in that year. The University also prepares quarterly financial statements and so accrual entries should be prepared to ensure balances in the accounts are reflective of the activities during the respective quarter whenever possible.
Accrual Types and Examples
Accrual journal entries are created in Banner using the form FGAJVCD.
| Accrual Type | Definition | Banner Account Code |
|---|---|---|
|
Accounts Receivable |
This asset represents amounts due from external parties for goods received or services rendered in the current year and for which payment has not been received by Quarter End / Year End Examples:
Journal Entry: Dr. A/R 100046 Cr. Revenue 5xxxxx NOTE: Amount accrued should NOT include taxes as this is not revenue belonging to McGill |
100046 |
|
Inventories |
All stocks of materials for external resale should be booked to this inventory account. This inventory must be valued at the lower of cost and net realizable value. Examples:
Journal Entry: Dr. Inventories 100103 Cr. Purchases 7xxxxx |
100103 |
|
Prepaid Expenses |
Expenses paid in one fiscal year which specifically relate to the operations of a future fiscal year. These expenses must be deferred. Examples:
Journal Entry: Dr. Prepaid Expenses 100111 Cr. Expense 7xxxxx |
100111 |
|
Accounts Payable |
Goods & services received by external parties prior to Year End but not invoiced by vendor in Fiscal Year 2010/ 11. Examples:
Journal Entry: Dr. Expense 7xxxxx Cr. A/P 200008 |
200008 |
|
Unearned Revenue |
Cash or revenues collected in advance of the delivery of the good or service Examples:
Journal Entry: Dr. Revenue 5xxxxx Cr. Unearned Revenue 200086 |
200086 |
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Request access to process ME15/ME16 journals
To request access to process ME15 & ME16 journals for yourself or someone else, send an email to FISsecurity.acct [at] mcgill.ca with a c.c. to your direct supervisor and Unit Financial Officer. Please note that the OLC - FIS 439 (previously FIS 339) course along with JE16 access are the pre-requisites to obtaining ME15 & ME16 access.
The request should include the subject 'ME15 & ME16 access', the individual's first and last name, and their Banner UserID.
| Sample email |
|---|
|
To: FISsecurity.acct [at] mcgill.ca Subject: ME15 & ME16 access Please grant access to Jane Smith (JSMITH1) to do ME15 & ME16 closing journals. Thank you, Your Name |
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