---
name: accrual-expense-calculator
description: "Calculates and documents month-end accrued expenses under US GAAP across recurring, invoice-lag, and estimate-based accrual types, producing per-account accrual amounts, journal entries, supporting workpaper narratives, and a reversal schedule. Use when performing month-end or period-end accruals, estimating expenses incurred but not yet invoiced, building accrual workpapers, or documenting accrual methodology for audit."
argument-hint: "[period] [expense-data]"
allowed-tools: ["Read"]
---

# Accrual Expense Calculator

## Purpose
Estimate accrued expenses for a close period under US GAAP and produce audit-ready documentation — per-account accrual amounts, the exact journal entries to book, workpaper narratives explaining each estimate, and the reversal schedule for next period. Eliminates the manual guesswork and inconsistent documentation that slow down month-end close and trigger auditor questions.

## When to Use
Invoke this skill when the user asks to:
- Calculate month-end or period-end accrued expenses
- Estimate expenses incurred but not yet invoiced (e.g., unbilled utilities, professional fees, vendor services)
- Build or update accrual workpapers for the close
- Generate accrual journal entries and their reversals
- Document accrual methodology or true-up prior estimates against actuals
- True-up an over- or under-accrual from a prior period

## Inputs Required
Before starting, collect:
- **Close period**: The month/period-end date the accruals are for (e.g., "March 2025, period-end 3/31/2025")
- **Expense items to accrue**: List of expenses with vendor/description, GL account, and any known amounts or contract terms
- **Available data per item**: Prior-period actuals, run-rate, contract/PO value, partial invoices received, or usage estimates
- **Prior accrual balances**: Existing accrual balances by account and whether prior estimates should be trued up to actuals
- **Reversal convention**: Auto-reverse next period (standard) or leave standing and true-up
- **Accrued liability account**: The GL account(s) where the credit lands (default: 2xxx Accrued Expenses / Accrued Liabilities)
- **Materiality threshold**: Dollar amount below which items are not accrued (optional)

If a materiality threshold is not provided, default to accruing all identified items and flag any under $500 as candidates for materiality exclusion. If reversal convention is not stated, default to auto-reversing entries.

## Instructions

### Step 1: Classify Each Expense by Accrual Type
Sort every item into the correct estimation method — the method drives the calculation and the documentation.

- **Type A — Invoice-Lag Accruals**: Service performed this period, invoice arrives next period (e.g., legal, audit, consulting, contractor hours). Amount is often known or closely estimable.
- **Type B — Recurring / Run-Rate Accruals**: Consistent monthly expenses billed in arrears or on a cycle that crosses period-end (e.g., utilities, rent escalations, subscriptions, payroll fringe). Estimate from run-rate or prior actuals.
- **Type C — Estimate-Based Accruals**: No invoice and no fixed run-rate; requires judgment (e.g., bonus accrual, warranty, incentive rebates, unbilled usage). Estimate from a defined driver (headcount, revenue %, usage volume).

State the classification for each item before calculating.

### Step 2: Calculate the Accrual Amount by Method

**Type A — Invoice-Lag**
- If a partial invoice or engagement fee is known: accrue the portion of service delivered through period-end.
- If unknown: use the most recent comparable invoice or contracted rate × units delivered.
- Formula pattern: `Accrual = (Contracted or expected total) × (portion of service completed in period)`

**Type B — Recurring / Run-Rate**
- Establish run-rate from a 3-month trailing average of actuals where available; otherwise use the most recent full-month actual.
- Prorate for partial-period coverage using days: `Accrual = Monthly run-rate × (days in period covered ÷ days in billing cycle)`
- Adjust for known escalations, rate changes, or seasonality and note the adjustment.

**Type C — Estimate-Based**
- Define the driver and the rate explicitly (e.g., bonus = eligible comp × target payout % × months elapsed ÷ 12).
- Show the driver value, the rate, and the resulting amount so the estimate is reproducible.

For every item, show the calculation inputs, the formula applied, and the resulting dollar amount rounded to the nearest dollar.

### Step 3: True-Up Prior Estimates
For any account with a prior accrual balance where actuals are now known:
- Compare prior accrual to actual invoice/actual cost.
- Calculate the variance and label it over-accrual or under-accrual.
- Determine the current-period adjustment: reverse the excess (over-accrual) or book incremental accrual (under-accrual).
- Flag any true-up exceeding 15% of the original estimate as a methodology review candidate.

### Step 4: Build the Journal Entries
For each accrual, produce a balanced journal entry:
- **Debit**: the relevant expense GL account
- **Credit**: the accrued liability account
- Include: entry date (period-end), account numbers, account names, debit/credit amounts, and a memo line describing the accrual basis.
- Confirm total debits equal total credits across the full batch.

### Step 5: Build the Reversal Schedule
- For auto-reversing entries: create the mirror-image reversal dated the first day of the next period (debit accrued liability, credit expense).
- For standing accruals subject to true-up: note the account, the balance carried, and the expected true-up trigger (invoice receipt, actual settlement).
- Present as a schedule the accountant can hand to the next close.

### Step 6: Write the Workpaper Narrative
For each material accrual, write a 2–4 sentence support narrative covering: what the expense is, why it must be accrued in this period (matching/incurred principle under US GAAP), the estimation method used, the data source, and any judgment applied. This is the audit-facing documentation.

## Output Format
- **Structure**: (1) Accrual Summary Table, (2) Detailed Calculations by item, (3) Journal Entries, (4) Reversal Schedule, (5) Workpaper Narratives, (6) Flags & Follow-Ups
- **Length**: 700–1,400 words depending on item count; scales with number of accruals
- **Format**: Tables for the summary, journal entries, and reversal schedule; structured bullets for calculations; short prose for narratives
- **Sections**: Accrual Summary → Detailed Calculations → Journal Entries → Reversal Schedule → Workpaper Narratives → Flags & Follow-Ups
- **Tone**: Precise, controls-minded, audit-ready — like a senior accountant documenting for review, not marketing copy

The Accrual Summary Table should include columns: Item / Description, GL Account, Accrual Type (A/B/C), Method, Amount, Reverses (Y/N). The Journal Entries section must show debits and credits with account numbers and a batch total confirming DR = CR.

## Quality Checklist
Before delivering output, verify:
- [ ] Every expense item is classified as Type A, B, or C with the method stated
- [ ] Each accrual shows its inputs, formula, and resulting amount — no unexplained figures
- [ ] Total debits equal total credits across the full journal entry batch (state the batch total)
- [ ] Every auto-reversing entry has a matching reversal dated the first day of the next period
- [ ] Any true-up exceeding 15% of the original estimate is flagged for methodology review
- [ ] Each material accrual has a workpaper narrative citing the estimation method and data source

## Notes
- The governing principle is the matching/accrual concept under US GAAP: recognize expense in the period incurred, regardless of when the invoice arrives or cash is paid.
- Prefer a trailing 3-month average over a single prior month for run-rate accruals when the expense is volatile — it smooths outliers and is easier to defend.
- Auto-reversing entries prevent double-counting when the actual invoice posts next period; only use standing accruals when a formal true-up process exists.
- When data is thin, document the assumption explicitly rather than omitting the accrual — an estimated-and-documented accrual is more defensible than a missed one.
- This skill produces estimates and documentation for a qualified accountant's review; it does not replace professional judgment or a formal audit.

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## How to use this skill

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**Using in Claude.ai, ChatGPT, Gemini, or other AI tools:**

1. Drag this file into a new chat, or copy and paste its contents
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