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This question is about accountant assistant skills.
What is true-up in accounting?
True-up in accounting is to reconcile, match, or tie-out two or more balances with the assistance of an adjustment. In the accounting realm, this gets recorded in an adjustment journal and is referred to as a true-up entry.
True-up can be used in the accounting contexts of timing differences, budget differences, errors and omissions, and quantification. There are many reasons why a true-up may be utilized in accounting, which stem from a mismatch between two balances.
Here is a brief look at the areas where a true-up applies:
Budgeting Differences
Certain recurring expenses are approximated at the beginning of a fiscal or calendar year and are then booked in each segment accordingly. This leads to a possibility of going over or under a budget.
Timing Differences
When an invoice or bill is not provided until the end of an accounting cycle, the expense is accrued as per approximation after the specific invoice or bill is provided. It is then matched up with the assistance of a true-up entry.
Errors and Omissions
Manual intervention can often lead to human errors, mistakes, and misses. True-up helps rectify these manual errors in accounting.
Quantification
All situations and expenses can not be anticipated and quantified in advance. An example is if an organization has an increase in staff within an accounting period that results in an additional payment of insurance premiums at the end of a calendar or fiscal year.
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