Accrual concept refers to the recognition of revenue and expenses in the financial statements

before the actual cash transaction takes place.

 Accrual concept is based on the matching principle, which states that expenses should
be recognized in the same period as the revenue they helped generate.
 This means that revenue and expenses are recorded in the financial statements when
they are earned or incurred, regardless of when the cash is received or paid.
 For example, if a company provides services to a customer in December but does not
receive payment until January, the revenue for those services would still be recognized in
December under the accrual concept.
 Similarly, if a company incurs expenses in December but does not pay for them until
January, the expenses would still be recognized in December under the accrual concept.
 Accrual concept is important for providing a more accurate picture of a company's
financial performance and position.
 It also helps to ensure that financial statements are consistent and comparable across
different periods.

Question 14:-

What is Prepaid Expense?

Answer:- Prepaid Expense is the expense that is paid in advance.For example Insurance, AMC, Rent
etc.An Entity initially record this transaction as a prepaid expense &transfer it to Profit & Loss
account over the usage of time.In Prepaid, First we have to pass the Payable Entry (PrepaidExpense
Account Dr To Vendor Account) Followed by a PaymentEntry(Vendor Account Dr To Bank Account).As
per the confirmation by the AP team over the mail regarding theprepaid expense & we have to
maintain the tracker in Excel & passthe accounting entry at every month endExpense Account DrTo
Prepaid Expense AccountThis is the GL to GL recurring entry that we need to pass everymonth end
by FBR2.

Question
16:- You
have paid
an advance
Rent of Rs
45,000 for
3months to
XYZ Ltd on
1st April
2020.Pass
necessary
Accounting
Entry?The
First Entry
Would
be1st April
2020Prepai
d
Rent Accou
nt Dr
45K-----------
B/s---
AssetsTo
XYZ
Account.
45KFollowe
d by a
Payment
Entry01st
April
2020XYZ
Account Dr
45KTo Bank
Account
45KNow we
have
to transfer
this prepaid
expense to
P&L
Account
&the
accounting
entry would
be30th April
2020Rent
Account Dr
15KTo
Prepaid
Rent
Account
15KThis is a
recurring
entry that
we need to
pass every
month by
usingT
code FBr2.

Question
17:- You
have paid
an advance
Rent of Rs
60,000 for 3
monthsto
XYZ Ltd on
1st April
2020 & you
forget to
take the
entry in the
month
ofMay’20.Pa
ss
necessary
Accounting
Entry?The
First Entry
would
be01st April
2020Prepai
d Rent
Account Dr
60KTo XYZ
Account.
60KFollowe
d by a
Payment
Entry01st
April
2020XYZ
Account Dr
60KTo Bank
Account
60KNow we
have
to transfer
this prepaid
expense to
P&L
Account
&the
accounting
entry would
be30th April
2020Rent
Account Dr
20KTo
Prepaid
Rent
Account
20K31st
May
2020 ..Forg
et to take
the
entry.30th
Jun
2020Rent
Account Dr
40KTo
Prepaid
Rent
Account
40K
Question
21:- What
is outstandi
ng
Expense?
Answer:- O
utstanding
expense
means the
expense
which
has beenbo
oked but
not yet
paidExpens
e Account
Dr-------------
P&L---
ExpenseTo
Outstandin
g
Expense Ac
count---------
----B/s---
LiabilitiesQ
uestion 22:-
What
is Outstandi
ng Income?
Answer:-
Outstandin
g income
means the
income
which
isearned
but not yet
received.Ou
tstanding
Income
Account
Dr -------------
----B/s----
AssetsTo
Income Acc
ount----------
---P&L----
Income Sid
e
Question
27:- What
is Provision
?Answer:-
Provision is
the amount
that we set
aside to
cover
thefuture
liability.For
Example:-
We have
sold some
goods to
ABC Ltd of
Rs
1,00,000&
they have
paid 60,000
rs and the
balance we
have
a doubt
torecover
it.SalesAbc
Account Ltd
100000To
Sales
Account
100000B/SD
ebtors
100000-
6000040,00
0

FB50:- GL
to GL
Entry----
Document
Type
SAFBL3N:-
For GL line
item Displa
yF-02:- For
GL to GL
Entry with
the help of
Posting
KeysFS10N
:- For
Account
Balance
DisplayFBR
2:- For
Recurring
EntriesF-
03:- For GL
ClearingFB
08:- For
Reversal of
open
ItemFB02:-
is used for
Change
Document
No
(Reference,
Narration)F
B03:- is
used for
Display
Document