Kate9986 Registered Posts: 16 Dedicated contributor ? ? ?
I am trying to do some practise papers but am stuck on one can someone help please!! When there is a prepayment/accrual opening balance and then a closing balance is it a debit or a credit, im getting so confused the more I try to work it out!! thanks Kate:001_smile:


  • Esme
    Esme Registered Posts: 711
    I don't understant what you mean.

    What does the question say? What paper is it on?
  • Kate9986
    Kate9986 Registered Posts: 16 Dedicated contributor ? ? ?
    :001_smile:It is on FRA - dec 07, there is an opening balance on the prepayment and the accrual and even when I look on the answers I cant get it!! If you could help that would be great!! Thanks so much for looking! Kate
  • Esme
    Esme Registered Posts: 711
    Accruals account always has a credit balance and Prepayment account always has a debit balance.

    The 200 Accrual from Oct needs to be taken off (credited) the payrol account as it was accrued in the previous year. This years accrual for 320 would be debited to payrol.

    The 250 prepayment should be debited to the rent account and 1000 (500 for nov and 500 for dec) should be credited to rent account.

    Hope this is ok!
  • Rune
    Rune Registered Posts: 91 ? ? ?
    DR CR

    Post Office Accruals opening
    Prepayments opening

    Accruals Closing Politically Correct
    Prepayments Closing

    This is how I remember it just remember Post office and then the rest fits in....
  • Sazpots
    Sazpots Registered Posts: 3 New contributor ?
    Hi Kate,

    When you've got an opening balance in a prepayment account, you paid for something last year which relates to this year. (ie pre-payments - paying for something before is due)
    Cr Rent £750 - to take it out of 2006 rent
    Dr Prepayments £750 - ready for 2007 rent

    So this year, you take it out of prepayments and put it into the rent account
    Cr Prepayments £750 - to take it out
    Dr Rent £750 - to put it in 2007 rent

    At this point there's nothing in your prepayments and in your rent account there's the debit balances of the £750 that you paid last year and the £6,250 that you've paid for this year. However, of that £6,250, £1,500 relates to the quarter ending Dec 07.

    £1,500 / 3 month (Oct, Nov & Dec 07) = £500 per month.
    But you only want to take out the rent for Nov & Dec 07 (2 x £500 = £1,000) and put it in prepayments to wait for the 2008 accounts.

    Cr Rent £1,000 to take it out of rent
    Dr prepayment £1,000 to put it in prepayments for next year.


    If you've got too much in an account and some of it relates to the next year you've paid for it before you need to, so put the next years figure in prepayments.

    If you've got less than what you should have in an account , and you get an invoice next year which relates to this year, you need to make an accrual for it in this years accounts.

    Hope this helps

Privacy Policy