Bookkeeping
Accrual basis bookkeeping
Accrual basis bookkeeping for UK limited companies: income is recognised when it is earned and costs when they are incurred, not only when cash moves, in line with FRS 102 or FRS 105. Debtors, creditors and accruals are kept current each month, giving a trial balance your statutory accounts can be built from directly.
Bank reconciliation summary
Illustrative client · August 2026
GBP
| Account | Difference | Status | ||
|---|---|---|---|---|
| Operating account··4821 | 184,220.16 | 184,220.16 | 0.00 | Reconciled |
| Reserve account··0937 | 60,000.00 | 60,000.00 | 0.00 | Reconciled |
| Company card··1006 | (12,418.52) | (12,418.52) | 0.00 | Reconciled |
| Card processor clearing | 8,905.40 | 8,905.40 | 0.00 | Reconciled |
| Payroll clearing | 0.00 | 0.00 | 0.00 | Reconciled |
Last weekly runFri 28 Aug, every account agreed to its statement.
Two open itemsTwo card receipts requested from you, marked on the card account until they arrive.
Illustrative. An example of the document, not a client's figures.
Why limited companies use accrual accounting
UK limited companies prepare statutory accounts under FRS 102 or, for the smallest companies, FRS 105. Both frameworks are built on accrual accounting: revenue is recognised when earned, costs when incurred, and the balance sheet carries debtors, creditors, accruals and prepayments rather than just a cash total.
What changes month to month
We record sales when they are invoiced, not only when the customer pays, and post supplier bills when they arrive rather than when they are settled. Accruals are raised for costs incurred but not yet billed, and prepayments are spread across the periods they relate to, so no single month is skewed by timing.
FRS 102 and FRS 105 thresholds
Micro-entities eligible for FRS 105 must have turnover of no more than £1,000,000 and a balance sheet total of no more than £500,000, alongside the employee test, for financial years starting on or after 6 April 2025. We flag during onboarding which threshold your company sits under, since it affects how much disclosure your year-end accounts eventually need.
Getting to the CT600 and Companies House
A reconciled accrual trial balance feeds two things directly: the Corporation Tax return, due within 12 months of the accounting period end, and the tax itself, due 9 months and 1 day after that same period end. It also feeds the statutory accounts filed at Companies House. We hand a clean trial balance to whoever files each; we do not file them ourselves.
Where this starts
If your books have been kept on a cash basis or have gaps, catch-up bookkeeping rebuilds the debtor, creditor and accrual balances first, so the switch to accrual does not lose comparability against prior periods.
Group and multi-entity structures
Where a UK holding company sits above one or more subsidiaries, accrual accounting also has to keep intercompany loans, management charges and recharges in balance across the group, not only within a single entity, so the consolidated position is not overstated when the accounts are drawn together.
Questions
Frequently asked questions: Accrual basis bookkeeping
Does every UK company have to use accrual accounting?
Yes, for statutory accounts; FRS 102 and FRS 105 are both built on accrual principles, unlike the cash basis some sole traders use for tax.
Can you convert our cash-basis history to accrual?
Yes, we rebuild debtor, creditor and accrual balances for prior periods so the switch does not break comparability.
Who files our Corporation Tax return and statutory accounts?
We prepare the reconciled trial balance and supporting schedules; filing with HMRC and Companies House is done by you or your appointed adviser.
How do accruals affect our reported profit compared with cash basis?
Accrual accounting can show profit earned before the cash lands, or a cost recognised before it is paid, which sometimes means reported profit and the bank balance move in different directions in a given month. We explain any large gap so it is not mistaken for an error.
Do you handle the transition entries when moving from cash to accrual mid-year?
Yes, the transition requires opening entries for accrued income, prepayments and accruals that did not exist under the cash basis, and we build those as part of the switch so the new accrual figures start from a correct opening position rather than a rough estimate.
Why would my business need accrual instead of cash basis?
A bank covenant, an investor, or growth past a revenue threshold often requires accrual reporting under your region's accounting framework.
Can you convert cash-basis history into accrual?
Yes. We rebuild receivables, payables and accruals for prior periods so the switch does not lose comparability.
What software works with accrual basis bookkeeping?
Accrual basis bookkeeping runs inside QuickBooks Online or Xero, whichever you already use. If you are not yet set up in either, we can configure a file in your name so you keep ownership of it once the engagement is under way.
How do we get started with accrual basis bookkeeping?
Getting started with accrual basis bookkeeping begins with a short review of your current records and software access. Once that is done we confirm scope and timing in writing, and ongoing work begins on the schedule agreed with you.
Related services
- BookkeepingCash basis bookkeepingBooks kept on a cash basis, recording income and expenses when money actually moves, for owners who want simple books that match their bank balance.
- BookkeepingChart of accounts designA chart of accounts built around how your business actually operates, so reports answer real questions instead of forcing everything into generic categories.
Industries
- SaaSBookkeeping and reporting for subscription software businesses tracking recurring revenue, deferred revenue and burn.
- Startups and VC-backed companiesBookkeeping and reporting for early-stage, venture-backed companies watching burn, runway and investor reporting closely.
- Construction and job costingBookkeeping for contractors and builders who need cost and profitability tracked by job, not just by month.
Next step
Talk to the team that would run your books
A short call covers your setup, your software and what a first month would look like. You get a written scope and price after it.