11._OTHER_PAYABLES_AND_OTHER_RECEIVABLES

OTHER PAYABLES AND OTHER RECEIVABLES
LESSON 1
OBJECTIVE OF THE
LESSON
 Understand the meaning of accrued expense (owing)
 Calculate the amount of accrued expense (owing)
 Calculate the amount transferred to the income statement as expense
 Record the entries in an Expense ledger account

YOU SHOULD CONSIDER THE FOLLOWING:
 The expenditure incurred ≠ to amount paid for that expenditure.

 Similarly, income earned ≠ to amount actually received.
 The financial statements are prepared as per matching principle.
 That is, taking into consideration the income earned and the
expenditure incurred.
 The main aim of this topic is to calculate the amount of incomes and
expenditures as per matching principle.
Accrued expenses
An accrual is referred to as the amount of money owing (due) at the end of the period. In case of an
expense, the benefit or service has been received and has not been paid by the end of the period.
Let’s look at an example

Accrued expenses
HOW DO WE RECORD IN THE
BOOKS?
To apply to the matching principle, the amount due is added to the amount paid and transferred to the income
statements.
Total amount paid is

44+56+62= 162
(+) owing 59 = 221
The amount due on an expense is recorded as “other payables” under current liabilities in the statement of
financial position.
LETS TRY EXERCISE 1
Yee’s payments included $45,000 for motor expenses for the year ended 31 December 2019.
At 31st December 2019 motor expenses due amounted to $750.
Write up the motor expenses account in Yee’s ledger to show the amount transferred to income statement.
LETS TRY EXERCISE 1
Motor expenses account

Date Detail Amount Date Detail Amount
31/12/19 Bank 45,000

LETS TRY EXERCISE 1

31/12/19 Bank 45,000
31/12/19 Balance/c/d 750
1/1/2020 Balance/b/d 750

LETS TRY EXERCISE 1

31/12/19 Bank 45,000
31/12/19 Balance/c/d 750
45,750 45,750
1/1/2020 Balance/b/d 750

LETS TRY EXERCISE 1

31/12/19 Bank 45,000 31/12/19 Income statement 45,750

31/12/19 Balance/c/d 750
45,750 45,750
1/1/2020 Balance/b/d 750

LESSON 2
OBJECTIVE OF THE
LESSON
 Understand the meaning of prepaid expense (in advance)
 Calculate the amount of prepaid expenses
 Calculate the amount transferred to the income statement
 Record the entries in an Expense ledger account

Prepaid expenses
Prepayment is referred to as the money paid in advance relative to the next year. In case of an expense,
it means a payment has been made during the financial year for some benefit to be received in a future
accounting period.

HOW DO WE RECORD IN THE BOOKS?
600 x 3/12 = 150

April – June 20-8)
TEST YOUR UNDERSTANDING
Exercise 2
Hamza’s financial year ends on 31st December 2017.

Hamza rented an additional warehouse for his What has the payment of rent given rise to?
business purposes.
How many months?
On 1st march 2017 he paid SR 18,000 for six
How much?
months from March to August 2017.
How much will be recorded in the income statement?
On 1st September 2017 he paid SR 18,000 for six
months from September 2017 to February 2018. Prepare rent payable account to show the amount
transferred to income statement.
Hamza rented an additional warehouse for his business purposes.
On 1st march 2017 he paid SR 18,000 for six months from March to August 2017.
On 1st September 2017 he paid SR 18,000 for six months from September 2017 to February 2018.
Prepare rent payable account to show the amount transferred to income statement.
Rent payable account

1/3/2017 Bank 18 000
1/9/2017 Bank 18 000

1/3/2017 Bank 18 000
1/9/2017 Bank 18 000
31/12/2017 Balance/c/d 6 000
1/1/2018 Balance/b/d 6 000
18 000 x 2/6 = 6 000


1/3/2017 Bank 18 000
1/9/2017 Bank 18 000
31/12/2017 Balance/c/d 6 000
36 000 36 000
1/1/2018 Balance/b/d 6 000
18 000 x 2/6 = 6 000


1/3/2017 Bank 18 000 31/12/2017 Income statement 30 000
1/9/2017 Bank 18 000
31/12/2017 Balance/c/d 6 000
36 000 36 000
1/1/2018 Balance/b/d 6 000
18 000 x 2/6 = 6 000

CONCLUSION
• Cash paid during the year may not be the expense for the year.
• The cause has to be an accrual or a prepayment.
• The expense needs to be recorded in the income statement.
• The accrued expense should be shown as a current liability and
prepaid expense as a current asset in the Statement of financial
position.
Exercise 5

1/9/ 2014 Balance/b/d 274
Exercise 5

1/9/ 2014 Balance/b/d 274
7/9/2014 Bank 274
Exercise 5

1/9/ 2014 Balance/b/d 274
7/9/2014 Bank 274
1/2/2015 Cash 96
Exercise 5

1/9/ 2014 Balance/b/d 274
7/9/2014 Bank 274
1/2/2015 Cash 96
31/8/2015 Balance/c/d 113
1/9/2015 Balance//b/d 113

Exercise 5

1/9/ 2014 Balance/b/d 274
7/9/2014 Bank 274
1/2/2015 Cash 96
31/8/2015 Balance/c/d 113
483 483
1/9/2015 Balance//b/d 113
Exercise 5

1/9/ 2014 Balance/b/d 274
7/9/2014 Bank 274
1/2/2015 Cash 96 31/8/2015 Income statement 209
31/8/2015 Balance/c/d 113
483 483
1/9/2015 Balance//b/d 113
Exercise 6
At 1 January 2018 insurance prepaid amounted to $1.140.
Alan paid insurance (for 12 months to 30 June 2019) $2,400.
Write up the insurance account in Alan’s ledger for the year ended
31 December 2018 to show the amount transferred to income
statement.
Insurance account
1/1/2018 Balance/b/d 1 140 31/12/2018 Income statement 2 340
Bank 2 400
31/12/2018 Balance/c/d 1 200
3 540 3 540
1/1/2019 Balance/b/d 1 200
LESSON 3
OBJECTIVE OF THE
LESSON
 Understand the meaning of accrued income (owing)
 Calculate the amount of accrued income (owing)
 Calculate the amount transferred to the income statement as an income
 Record the entries in an income ledger account

YOU SHOULD CONSIDER THE FOLLOWING:
 The expenditure incurred ≠ to amount paid for that expenditure.

 Similarly, income earned ≠ to amount actually received.
 The financial statements are prepared as per matching principle.
 That is, taking into consideration the income earned and the
expenditure incurred.
 The main aim of this topic is to calculate the amount of incomes and
expenditures as per matching principle.
Accrued income
An accrual is referred to as the amount of money owing (due) at the end of the
period. In case of an income, the benefit or service has been received by another
person and has not been paid by the end of the period.
The amount due on an income is
recorded as “other receivables”
under current assets in the
statement of financial position.
Let’s try Exercise 9
LESSON 4
OBJECTIVE OF THE
LESSON
 Understand the meaning of prepaid income (owing)
 Calculate the amount of prepaid income (owing)
 Calculate the amount transferred to the income statement as an income
 Record the entries in an income ledger account

Prepaid incomes
Prepaid income is referred to as the money received in advance relative to the next year. In case of
an income it means a payment has been received during the financial year for some benefit not
yet provided by the business at the end of the financial year.

$1000 / 4 = $250
The amount prepaid on an income is
recorded as “other payables” under
current liabilities in the statement of
financial position.

11._OTHER_PAYABLES_AND_OTHER_RECEIVABLES

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OTHER PAYABLES AND OTHER RECEIVABLES

 Calculate the amount of accrued expense (owing)

 Calculate the amount transferred to the income statement as expense

 Record the entries in an Expense ledger account

 The expenditure incurred ≠ to amount paid for that expenditure.

Let’s look at an example

Total amount paid is

At 31st December 2019 motor expenses due amounted to $750.

At 31st December 2019 motor expenses due amounted to $750.

Motor expenses account

31/12/19 Bank 45,000

At 31st December 2019 motor expenses due amounted to $750.

Motor expenses account

31/12/19 Bank 45,000

31/12/19 Balance/c/d 750

1/1/2020 Balance/b/d 750

At 31st December 2019 motor expenses due amounted to $750.

Motor expenses account

31/12/19 Bank 45,000

31/12/19 Balance/c/d 750

1/1/2020 Balance/b/d 750

At 31st December 2019 motor expenses due amounted to $750.

Motor expenses account

31/12/19 Bank 45,000 31/12/19 Income statement 45,750

1/1/2020 Balance/b/d 750

 Calculate the amount of prepaid expenses

 Calculate the amount transferred to the income statement

 Record the entries in an Expense ledger account

Let’s look at an example

600 x 3/12 = 150

Hamza’s financial year ends on 31st December 2017.

Hamza’s financial year ends on 31st December 2017.

Rent payable account

Hamza’s financial year ends on 31st December 2017.

Rent payable account

1/1/2018 Balance/b/d 6 000

18 000 x 2/6 = 6 000

Hamza’s financial year ends on 31st December 2017.

Rent payable account

18 000 x 2/6 = 6 000

Hamza’s financial year ends on 31st December 2017.

Rent payable account

18 000 x 2/6 = 6 000

Motor expenses account

Date Detail Amount Date Detail Amount

Motor expenses account

Date Detail Amount Date Detail Amount

Motor expenses account

Date Detail Amount Date Detail Amount

Motor expenses account

Date Detail Amount Date Detail Amount

1/9/2015 Balance//b/d 113

Motor expenses account

Date Detail Amount Date Detail Amount

Motor expenses account

Date Detail Amount Date Detail Amount

At 1 January 2018 insurance prepaid amounted to $1.140.

Alan paid insurance (for 12 months to 30 June 2019) $2,400.

 Calculate the amount of accrued income (owing)

 Calculate the amount transferred to the income statement as an income

 Record the entries in an income ledger account

 The expenditure incurred ≠ to amount paid for that expenditure.

 Calculate the amount of prepaid income (owing)

 Calculate the amount transferred to the income statement as an income