Using estimates for accrual entries when actual amounts are not known is referred to as what?

Using estimates for accrual entries when actual amounts are not known is referred to as accounting estimates. This practice is essential in accounting as it allows organizations to recognize expenses and revenues in the period they occur, even if the exact amounts are not yet determinable.

In accrual accounting, it is critical to align income and expenses to the correct accounting periods, reflecting the organization's financial activity accurately. Therefore, when actual amounts are unavailable, estimates are utilized to create a more accurate financial picture. These estimates can be based on historical data, industry trends, or other relevant information, enabling financial statements to provide a reasonable representation of the organization’s performance and position.

This approach helps in maintaining the integrity and transparency of financial reporting, ensuring stakeholders can make informed decisions based on the data presented.