Accruals and Prepayments
mattyj3nks
Registered Posts: 28 Regular contributor ⭐
hi all,
i am really finding it hard to get my head around the whole thing of accruals and prepayments.
i have read the text book but still cant make sense of it.
im sure i understand that in the E.T.B:
Accruals
in adjustments
DR = Telephones (for example)
CR = Accruals
in P+L
DR = Telephones
in B/S
CR = Accruals
Prepayments
in adjusments
DR = Prepayments
CR = Rents paid (for example)
in P+L
CR = Rents paid
in B/S
DR = Prepayments
i hope thats right!!
i just cant seem to understand the journal entries and the t accounts, i need to try and understand this to then i can try to find a way of remembering it.
someone please help......
i am really finding it hard to get my head around the whole thing of accruals and prepayments.
i have read the text book but still cant make sense of it.
im sure i understand that in the E.T.B:
Accruals
in adjustments
DR = Telephones (for example)
CR = Accruals
in P+L
DR = Telephones
in B/S
CR = Accruals
Prepayments
in adjusments
DR = Prepayments
CR = Rents paid (for example)
in P+L
CR = Rents paid
in B/S
DR = Prepayments
i hope thats right!!
i just cant seem to understand the journal entries and the t accounts, i need to try and understand this to then i can try to find a way of remembering it.
someone please help......
0
Comments
-
Yes you are right
One way to remember
Debtors must be a debit balance - Debtors & Prepayments go together so the prepayment haeding must be a debit
Creditors must be a credit balance - Creditors & accruals go together so the accrual heading must be a credit
Another is
If you are prepaying an amount you are reducing the charge in the expense heading for the current year/period as it relates to the next one. An expense is always a debit so to reduce you most post a credit to the expense heading
If you are bringing in an expense from the next year/preiod (accruing) then you are trying to increase the charge in the current year/period. As before an expense must be a debit so to increase it you most post a debit to the expense heading
Hope this helps!Regards,
Burg0 -
what t accounts would i need to post to though??
and what would the entries be??0
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