What is a true up in accounting?

A true-up in accounting refers to the process of reconciling actual amounts with estimated amounts that were previously recorded. This usually occurs when there is a difference between the estimated amount and the actual amount at the end of a reporting period, such as a fiscal year.

True-up adjustments are made to ensure that financial statements accurately reflect the company's financial position and performance. This can involve adjusting expenses, revenues, assets, or liabilities to reflect the actual amounts that were incurred or realized during the period.

True-ups are common in areas such as accrual accounting, where estimates are used to record transactions that have not yet been fully realized. By performing a true-up, companies can provide more accurate and reliable financial information to stakeholders.

Overall, true-ups play a vital role in maintaining the integrity and accuracy of financial statements and ensuring compliance with accounting standards and regulations.