Accrued liabilities (in Swiss German: "transitorische Passiven") are essential accounting tools that come into play especially around the year-end closing. They help allocate income and expenses to exactly the right periods. This process can help you:
- improve financial clarity,
- avoid mistakes that could cause accounting headaches,
- and ultimately make your financial reports more accurate.
"Understanding and correctly applying accrued liabilities can be a decisive factor for a company's financial success and clarity."
Compared with other countries, there are certain Swiss specifics to bear in mind when booking accrued liabilities. Swiss legislation and standards play an important role here, as they set the framework for booking these items correctly.
You should also make sure that all relevant cash flows are documented precisely and that accruals are made carefully, so that the accounts reflect the company's actual financial position.
How do accrued liabilities work in Swiss accounting?
In accounting, the accrual principle is crucial for presenting a company's financial performance correctly.
Accrued liabilities play an important role here. They ensure that expenses are recorded in the period in which they are actually incurred. In Switzerland, the Code of Obligations (OR) and Swiss GAAP FER govern how these accruals are treated.
In this article, we explain what accrued liabilities are, how to record them correctly in Swiss accounting and what you need to watch out for to avoid common mistakes.
What exactly are accrued liabilities?
Accrued liabilities are obligations for expenses that relate to the current financial year but whose invoices only arrive in the following year. This would be the case, for example, if an employee works for you in December but the payroll is only processed in January, i.e. in the following financial year. You can record this amount as an accrued liability so that the expense is allocated to the correct financial year.
The reverse case belongs here too: income you already received in the old year that relates to the new year – for example a customer who pays for next year's annual subscription in advance in December. This amount is also deferred as an accrued liability. In the Swiss SME chart of accounts, it goes to account 2300 "Accrued liabilities and deferred income".
Am I legally required to book accrued liabilities?
Under Art. 958b OR, accounts must be kept on an accrual basis, which requires transitory items to be recorded correctly. Swiss GAAP FER 23 defines provisions and distinguishes them from accrued liabilities, stressing that provisions are based on probable obligations of uncertain amount or timing, whereas accrued liabilities are used for amounts that are already known.
Legal requirements aside, accrued liabilities are definitely worthwhile – otherwise you may not be able to tell how well a financial year actually went.
How do I book accrued liabilities?
When recording accrued liabilities, the expense is booked in the old year; the offsetting entry is a credit to the "Accrued liabilities" account. In the new year, the liability is released as soon as the invoice arrives and is paid.
Example: at the end of December, your company has to call out a mechanic to fix a broken machine, but he only sends the CHF 5,000 invoice in January.
| Date | Debit | Credit | Amount |
|---|---|---|---|
| 31.12.25 | Expense account | Accrued liabilities | CHF 5,000 |
| 07.01.26 (invoice received) | Accrued liabilities | Trade payables | CHF 5,000 |
| 07.01.26 | Trade payables | Bank | CHF 5,000 |
Alternatively, the accrual is often reversed in full straight away on 01.01., so that the expense can be booked as normal when the invoice arrives.
What mistakes often happen with accrued liabilities?
Confusing them with provisions: it's important to distinguish accrued liabilities from provisions, as provisions are made for uncertain obligations, whereas accrued liabilities represent known amounts. Provisions are therefore based more on assumptions and estimates about upcoming expenses (e.g. if you are involved in a lawsuit and expect it to cause further costs), while accrued liabilities are for amounts you already know.
Incorrect accruals: document your accruals carefully and record all relevant bookings precisely. Incomplete accruals cause discrepancies and distort reporting.
Distinguishing between types of accruals: also pay attention to the difference between prepaid expenses and accrued income on the assets side and accrued liabilities on the liabilities side. If you defer an advance payment or income not yet invoiced on the wrong side of the balance sheet, both your result and your balance sheet will be misstated.
Transitory items at year-end: at the end of the year, all transitory items should be reviewed thoroughly and reversals made promptly. This prevents distortions in the new financial year.
Reset accounts to zero regularly: regularly bring the accounts for prepaid expenses/accrued income and accrued liabilities back to zero. Accounting software can help, as it calculates period accruals automatically.
What is the difference between prepaid expenses/accrued income and accrued liabilities?
Prepaid expenses and accrued income (in Swiss German: "transitorische Aktiven") are the mirror image of accrued liabilities. They cover two cases:
- Prepaid expenses: you already paid in the old year, but the expense relates to the new year – for example January's rent, which you transfer in December.
- Accrued income: you delivered a service in the old year but only invoice it in the new year.
Accrued liabilities cover the two opposite cases: expenses of the old year that are only invoiced later, and income you received in advance. A common misconception is that an advance payment received is a prepaid item on the assets side – in fact it is an accrued liability (deferred income), because you still owe the service. So for every accrual, check which side of the balance sheet it belongs on.
How do I book prepaid expenses and accrued income?
At year-end, you first determine the amounts that relate to the old year but have not yet been booked, and the payments that have already been booked but relate to the new year. In the Swiss SME chart of accounts, prepaid expenses and accrued income are booked to account 1300 "Prepaid expenses and accrued income".
Income not yet invoiced: in December you delivered a service worth CHF 500 that you only invoice in January. On 31 December, you debit "Prepaid expenses and accrued income" and credit the income account. That way, the income appears in the right year.
Expense paid in advance: in December you paid January's rent of CHF 2,000 and booked it as rent expense. On 31 December, you debit "Prepaid expenses and accrued income" and credit rent expense. That way, January's rent only hits the new year.
In the new year, you release the accruals by reversing these bookings.
If you use simple accounting software such as infinity.swiss, you can easily correct incorrect allocations. This is extremely helpful for ensuring that your annual financial statements are accurate. Make sure you check all bookings carefully to avoid common accrual mistakes.