Incomplete Records CAN SOME ONE TELL ME IF IM RIGHT??
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Pease can someone explain this to me.
I have been going through the past papers and i seem to be ok with the sales and purchase incomplEte records but struggle when it comes to the expenses!
The part im getting confused with is the accruals and prepayments. I thought that accruals would be a credit in the expense a/c and the preayment would be a debit. However, this does not seem to be the case. In some past papers the accruals and prepayments seem to be the bal b/d and c/d figures. I dont understand?????
Please can some one explain to me why the prepayments and accruals would be the b/d figures and c/d figures on the opposite side of the account to what they should be.
Sorry if i seem vague a prime example of what im trying to understand would be the june 06 paper question 1.2.
PLEASE HELP ME!!! If i can get this i will fly through!!!
I have been going through the past papers and i seem to be ok with the sales and purchase incomplEte records but struggle when it comes to the expenses!
The part im getting confused with is the accruals and prepayments. I thought that accruals would be a credit in the expense a/c and the preayment would be a debit. However, this does not seem to be the case. In some past papers the accruals and prepayments seem to be the bal b/d and c/d figures. I dont understand?????
Please can some one explain to me why the prepayments and accruals would be the b/d figures and c/d figures on the opposite side of the account to what they should be.
Sorry if i seem vague a prime example of what im trying to understand would be the june 06 paper question 1.2.
PLEASE HELP ME!!! If i can get this i will fly through!!!
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Comments
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Re:PLEASE HELP ME!!! Incomplete Records
Hi
Accruals - CR
Prepayments - DR
This is how it is at the end of the year. However, you have to bring forward these amounts in preparation for the following year or previous year in this case.
EG
So - Year end is 31st December 2006. In October 2006, you paid £1000 for rent from October 06 to July 2007 - so you've prepaid for 7 months. You would DR prepayment and CR Rent. When it comes to the following year, you have to carry these amounts forward as it relates to 2007, so it would be DR Rent and CR prepayment. If you think about it prepayments are like DEBTORS and accruals are like CREDITORS.
Thats why there are b/d and c/d figures because its monies that relate to the following year, that were paid/accrued for in the previous year.
I hope this helps you abit but if there is anyone that can explain it better, please do - I am useless at trying to explain things!!!!
Cheers
Lou0 -
Re:PLEASE HELP ME!!! Incomplete Records
Ithink i got it now please can someone tell me if im on the right track!! If I can get this I'll be fine, this is th eonly thing thats making me mess section 1 up!
Accruals
If there is an accrual in the list of balances from the previous period that relates to the expense account, this becomes the b/d figure on the credit side because this is what is already owed by the business for the beginning of the new period. If in that period there is an accrual for the next period that will become the c/d figure for the same reason.
Prepayments
If there is a prepayment in the list of balances that relates to the expense from the previous period, this becomes the b/d figure on the debit side as it is what has already been paid by the business for the beginning of the new period. If in that period there is a prepayment for the next period that will become the c/d figure for the same reason.
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