Accrual Accounting: How AI Can Validate Accruals with Greater Accuracy

Accrual accounting is the cornerstone of modern financial reporting. Unlike cash-based accounting, where transactions are recorded only when cash changes hands, accrual accounting records revenues and expenses when they are earned or incurred, offering a more accurate picture of a company's financial health.

But with this precision comes complexity—and room for errors, misstatements, or even fraud. That’s where AI-powered platforms like Svenry can help.

What Is Accrual Accounting?

In accrual accounting:

• Revenue is recorded when a sale is made—not when payment is received.

• Expenses are recorded when a liability is incurred—not when cash is paid out.

This approach is required by GAAP and IFRS standards and provides a clearer view of financial obligations and income streams.

Why Accruals Are a Risk Area

Accruals involve estimates and judgments, which can lead to:

• Overstated revenues or understated expenses (common in financial statement manipulation).

• Unjustified accruals recorded to smooth earnings across reporting periods.

• Misclassified transactions due to poor documentation or inconsistent policies.

In manual or semi-automated environments, validating accruals typically involves spreadsheets, samples, and reactive audits—leaving blind spots.

How Svenry Supports Accrual Validation with AI

Svenry leverages artificial intelligence to help finance teams and auditors validate accruals more efficiently and reliably by:

1. Cross-Referencing Documents Automatically

Svenry scans and analyzes contracts, invoices, and purchase orders against ERP records to ensure that:

• Accrual entries match legitimate obligations.

• Payment timelines and obligations align with supporting documents.

2. Detecting Anomalies in Accrual Patterns

By learning your organization’s historical accrual behavior, Svenry flags:

• Irregular accrual amounts outside of expected ranges.

• Duplicate or recurring accruals without corresponding expense triggers.

• Vendor or departmental trends that deviate from norms.

3. Ensuring Compliance with Accounting Standards

Svenry’s AI is built to recognize GAAP and IFRS patterns, helping teams identify when accruals fall outside of acceptable accounting treatments—before auditors or regulators do.