Under accrual accounting, an uninvoiced item is a transaction you have to record before the invoice exists: goods you have received but the vendor hasn’t billed you for, or work you have delivered but haven’t billed the customer for yet. The entry lands in the period the goods moved or the service was performed, sits in a temporary accrual account, and reverses when the actual invoice arrives. The IRS applies the same timing to accrual-method taxpayers, so getting these entries right controls both your financial statements and your taxable income for the year.
The Two Kinds of Uninvoiced Items
Everything in this category falls into one of two buckets, and the distinction matters because they hit opposite sides of the balance sheet.
The first is an uninvoiced liability, most often called Goods Received Not Invoiced (GRNI). Your warehouse confirms a shipment arrived on December 28, but the vendor’s invoice doesn’t show up until January 10. You already have the inventory and a legal obligation to pay for it. That liability exists in December regardless of when the vendor gets around to billing you. The same logic covers services performed by a contractor before their bill arrives, and recurring costs like utilities and rent — you consumed the electricity in December even though the bill arrives in January.
The second is uninvoiced revenue, the mirror image. A consulting firm that finishes a project milestone on December 31 but doesn’t send the invoice until January 5 has earned that revenue in December. Under ASC 606, revenue is recognized when a performance obligation is satisfied by transferring the promised good or service.1Financial Accounting Standards Board. Revenue from Contracts with Customers (Topic 606) The invoice date has nothing to do with that analysis. On the balance sheet, uninvoiced revenue shows up as accrued revenue or, in project-based work, as an unbilled receivable inside work in progress.
Why the Entry Can’t Wait for the Paperwork
If you skip the accrual on the liability side, accounts payable is artificially low, current liabilities are understated, and equity looks inflated. The expense never lands in the current period, so cost of goods sold or operating expenses come in too low and net income is overstated. Anyone reading your profitability ratios is reading the wrong numbers.
The revenue side creates the opposite problem. Deliver services in December, invoice in January, and December’s income statement is understated while January’s is inflated. Accrued revenue on the balance sheet is too low, depressing reported working capital. Both months are wrong.
The underlying issue in both directions is the same: expense and revenue aren’t landing in the period where the economic activity happened. That violates the matching principle, and if the amounts are large enough to influence a reasonable investor’s decision, they cross into material misstatement territory.2U.S. Securities and Exchange Commission. Assessing Materiality – Focusing on the Reasonable Investor When Evaluating Errors
What the IRS Requires for Accrual Taxpayers
Most small businesses can elect the cash method, but the accrual method is mandatory once average annual gross receipts over the prior three years exceed $32 million for tax years beginning in 2026.3Internal Revenue Service. Revenue Procedure 2025-32 That figure is inflation-adjusted from a $25 million statutory base.4Office of the Law Revision Counsel. 26 USC 448 – Limitation on Use of Cash Method of Accounting Businesses that produce, purchase, or sell merchandise generally have to use accrual regardless of size, because inventory costs need to be matched to income.
Income: The All-Events Test
You include an item of gross income in the tax year when the all-events test is met, meaning all events have occurred that fix your right to receive the income and the amount can be determined with reasonable accuracy.5Internal Revenue Service. Publication 538 – Accounting Periods and Methods If you keep an applicable financial statement, you report the income no later than when it shows up as revenue there.6Office of the Law Revision Counsel. 26 USC 451 – General Rule for Taxable Year of Inclusion Practically: uninvoiced revenue you have earned can’t be pushed to next year just because you haven’t billed the customer. Once the work is complete and the amount is determinable, it’s taxable.
Expenses: All-Events Plus Economic Performance
Deductions require two things. The all-events test must be met (the fact of the liability is established and the amount is reasonably determinable), and economic performance must have occurred.5Internal Revenue Service. Publication 538 – Accounting Periods and Methods For services or property provided to you, economic performance happens as the services are performed or the property is delivered.7Office of the Law Revision Counsel. 26 USC 461 – General Rule for Taxable Year of Deduction
That’s the tax hook for GRNI. If a vendor delivered goods to your warehouse in December, economic performance occurred in December, and you deduct that cost in December even if the invoice arrives in February. Waiting for the paperwork pushes a legitimate deduction into the wrong year and overstates your taxable income.
Finding the Items at Period End
The accrual sweep is where most of the actual work happens. Start with goods receipt records. Pull every receiving report from the period that doesn’t have a matched vendor invoice in the accounting system. Those are your clearest GRNI items — receiving confirmed delivery, but accounts payable has nothing to process.
Then work through open purchase orders. Look specifically for POs showing partial or full delivery that remain open because no invoice has closed them out. For service contracts, check project management or time-tracking reports for milestones and hours delivered by the vendor but not yet billed.
Recurring expenses without POs need a different approach. Utilities, rent, and insurance accrue based on consumption, so use the prior month’s actual bill or the contractual rate to estimate the current period. The estimate needs to be reasonable, not perfect.
The Journal Entries
For an uninvoiced liability, debit the expense account (or Inventory, if the goods are going into stock) to recognize the cost in the current period, and credit a temporary liability account such as Accrued Expenses or GRNI to reflect the obligation.
Don’t route the credit straight to accounts payable. A/P is reserved for invoiced items; posting uninvoiced entries there clutters the subledger, makes reconciliation harder, and creates confusion about what’s actually ready to pay. The temporary GRNI or Accrued Expenses account keeps the two populations separate.
For uninvoiced revenue, the entry flips: debit Accrued Revenue (a current asset) to capture what the customer owes you for work already performed, and credit Revenue or Sales to recognize the income.
Clearing the Accrual When the Invoice Arrives
Most accounting teams handle the cleanup with a reversing entry, an exact mirror of the original accrual posted on the first day of the new period. When the real invoice comes in and gets recorded normally, the temporary account washes out and A/P picks up the liability.
The manual alternative is matching each incoming invoice against its corresponding accrual entry. It works, but it doesn’t scale. If you process hundreds of invoices a month, reversing entries let accounts payable staff process every invoice the same way without checking whether it was previously accrued.
Two things to watch. First, if the actual invoice amount differs from your estimate, the reversal leaves a residual in the expense account. That’s normal, and the difference flows through as an adjustment in the current period. Second, if reversing entries fail to post — a common issue after system upgrades or when the entries are set up incorrectly — you’ll double-count the expense: once from the accrual, once from the invoice. A quick period-end check that all reversals actually ran will catch it.
Controls That Keep the Numbers Clean
The goal isn’t to eliminate accruals. Some gap between delivery and invoicing is inevitable. The goal is to make sure nothing slips through unrecorded.
Cutoff Procedures
A written cutoff policy sets the exact date and time by which transactions have to be recorded for the current period. Warehouse staff need to know that goods received before the cutoff belong in this month’s numbers, and A/P needs a clear invoice-processing deadline. Without an enforced cutoff, goods sit on the dock and nobody tells accounting about them until well into the next month.
Three-Way Matching
The three-way match compares the purchase order, the receiving report, and the vendor invoice before payment goes out. For uninvoiced-item purposes, the value is what shows up when the match is incomplete: a PO with a receiving report but no matched invoice is an automatic accrual candidate. Most ERPs can generate that exception report at period-end.
Monthly GRNI Reconciliation
Reconcile the GRNI account every month, not just at quarter- or year-end. Review every open entry, filter by date, vendor, and PO, and decide which entries are legitimately waiting for an invoice and which are stale.
Stale entries are the real danger. A GRNI entry that’s been sitting for 90 days usually means one of two things: the invoice came in and was processed but nobody cleared the accrual, or the invoice was lost and needs to be requested from the vendor. Either way, an aging report that flags entries older than 30 or 60 days forces someone to investigate. Left alone, stale GRNI balances accumulate and gradually distort both the balance sheet and cost of goods sold.
What Your Auditors Will Test
External auditors will independently test for uninvoiced items you may have missed, and knowing the procedure helps you prepare.
The standard test is a review of subsequent disbursements. Auditors pull a sample of invoices paid after year-end, sometimes through the date of the audit itself, and trace each one back to determine whether the underlying liability existed before the cutoff. If an invoice dated January 8 covers services performed in November, they expect to see an accrual on the December 31 balance sheet. If it’s missing, that’s a finding.
Auditors also scan the accounts payable listing as of the balance sheet date, review the file of actual invoices on hand, and look for what isn’t there. Inventory in transit is a classic case: shipping confirmation shows goods left the vendor’s warehouse on December 29, but neither the goods nor the invoice have arrived by year-end. Under FOB shipping point terms, you own those goods the moment they ship, and the liability needs to be recorded.
The best posture going into audit season is having already done the work. A clean GRNI reconciliation, a documented list of accrued items, and a cutoff analysis that shows everything received before the close date was accounted for will get you through this section without surprises. For public-company filers, the same discipline is what keeps unrecorded liabilities from becoming a material misstatement that triggers a restatement and the certification and disclosure obligations that follow under Sarbanes-Oxley.8Office of the Law Revision Counsel. 15 USC 7241 – Corporate Responsibility for Financial Reports