Scribd Logo
Upload

Welcome to Scribd!

  • Accruals and Prepayments

    Uploaded by

    Christopher Ronald
    51 views3 pages
    The document discusses the accounting concepts of accruals and prepayments. It explains that accruals recognize expenses and income in the periods they are incurred or earned, rather than when cash is paid or received. Accrued expenses increase expenses on the income statement, while accrued income increases income. Prepayments recognize expenses and income in advance of receiving or providing the benefit. Prepaid expenses are recorded as assets, while pre-received income is a liability. Both accruals and prepayments adjust income statement amounts to adhere to the matching and accrual principles.

    Original Description:

    Original Title

    accruals and prepayments

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document discusses the accounting concepts of accruals and prepayments. It explains that accruals recognize expenses and income in the periods they are incurred or earned, rather than when cash is paid or received. Accrued expenses increase expenses on the income statement, while accrued income increases income. Prepayments recognize expenses and income in advance of receiving or providing the benefit. Prepaid expenses are recorded as assets, while pre-received income is a liability. Both accruals and prepayments adjust income statement amounts to adhere to the matching and accrual principles.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    51 views3 pages

    Accruals and Prepayments

    Uploaded by

    Christopher Ronald
    The document discusses the accounting concepts of accruals and prepayments. It explains that accruals recognize expenses and income in the periods they are incurred or earned, rather than when cash is paid or received. Accrued expenses increase expenses on the income statement, while accrued income increases income. Prepayments recognize expenses and income in advance of receiving or providing the benefit. Prepaid expenses are recorded as assets, while pre-received income is a liability. Both accruals and prepayments adjust income statement amounts to adhere to the matching and accrual principles.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    Paper F3, Financial Accounting Lecture by: Miss Atiqa Rehman

    ACCRUALS AND PREPAYMENTS

    Accrual Concept:

    Expenses and income should be recorded in the year in which it is incurred or earned not in the year in which cash is
    paid or received.

    • Accrued Expenses
    • Accrued Income

    Accrued Expenses:

    Benefit is taken or availed but payment is not yet been made.

    Cash Expense
    Dr. Expense xxx -- Income Statement
    Cr. Cash xxx -- Balance Sheet (Current Asset)

    Accrued Expense
    Dr. Expense xxx -- Income Statement
    Cr. Accrued Expense xxx -- Balance Sheet (Current Liability)

    Expense

    o/b (accrued Expense) xxx


    Cash xxx
    XXX -- Income Statement as an
    c/d (accrued expense) xxx Expense

    Accrued Income:

    Services or benefit provided but cash is not yet received.

    Cash Income
    Dr. Cash xxx -- Balance Sheet
    Cr. Income xxx -- Income Statement

    Accrued Income
    Dr. Accrued Income xxx -- Balance Sheet (Current Asset)
    Cr. Income xxx -- Income Statement

    Income
    o/b (accrued Income) xxx Cash xxx

    XXX -- Income Statement as an c/d (accrued income) xxx


    Income

    1-Page | 4th of May 2011 Prepared by: Mani Shah

    CENTER FOR PROFESSIONAL EXCELLENCE, RAWALPINDI


    http://acca.moviezbuzz.com
    Paper F3, Financial Accounting Lecture by: Miss Atiqa Rehman

    • Accrued Expense increases the amount of expense in income statement by adding in expenses.
    • Accrued Income increases the amount of income in the income statement by adding in income.

    Prepayments:

    • Prepaid Expense
    • Pre-Received Income

    Prepaid Expense:

    • Cash is paid in advance but benefit is not yet taken

    Cash Expense
    Dr. Expense xxx -- Income Statement
    Cr. Cash xxx -- Balance Sheet

    Prepaid Expense
    Dr. Prepaid Expense xxx -- Balance Sheet (Current Asset)
    Cr. Expense xxx -- Income Statement (Expense)

    Expense
    o/b (prepaid expense) xxx XXX -- Income Statement as an
    Expense
    Cash xxx
    c/d (prepaid expense) xxx

    Pre-received Income:

    • Cash is received in advance but benefit is not yet provided

    Cash Income
    Dr. Cash xxx -- Balance Sheet
    Cr. Income xxx -- Income Statement

    Pre-received Income
    Dr. Income xxx -- Income Statement
    Cr. Pre-received Income xxx -- Balance Sheet (Current Liability)

    Income
    o/b (pre-received income) xxx
    XXX -- Income Statement as an
    Income
    Cash xxx
    c/d (pre-received income) xxx

    2-Page | 4th of May 2011 Prepared by: Mani Shah

    CENTER FOR PROFESSIONAL EXCELLENCE, RAWALPINDI


    http://acca.moviezbuzz.com
    Paper F3, Financial Accounting Lecture by: Miss Atiqa Rehman

    Expense (Accrued & Prepaid)


    o/b (prepaid expense) xxx o/b (accrued Expense) xxx

    Cash xxx XXX -- Income Statement as an Expense

    c/d (accrued expense) xxx c/d (prepaid expense) xxx

    Income (Accrued & Pre-received)


    o/b (accrued Income) xxx o/b (pre-received income) xxx

    XXX -- Income Statement as an Income Cash xxx

    c/d (pre-received income) xxx c/d (accrued income) xxx

    3-Page | 4th of May 2011 Prepared by: Mani Shah

    CENTER FOR PROFESSIONAL EXCELLENCE, RAWALPINDI


    http://acca.moviezbuzz.com

    You might also like