Accruals/Prepayments

jewels.p

Hi all,

I am getting confused!:confused1:

I am trying to do a P & L Account for the year ending 2004 and have the following figures.

At the end of the financial year 2003 there is prepaid general expenses of £700
At the end of the financial year 2004 there is an accrual for general expenses of £210

The amount for general expenses paid for the year is £8110

Am I right in adding both the 700 and the 210 to the £8110 to get the final figure?

Not sure now! Usually prepayments are deducted and accruals are added aren't they?:001_unsure:

Thanks

rachy1975

im not sure but i would of thought the prepayment would have been dealt with in the 2003 profit and loss??
and the 2004 is the accrual figure should be used for 2004??

crispy

Hello,

You are correct to add both the £700 and £210 for the expense account, this is becuase for the accounts y/e 2004 you are reversing the prepayment created in y/e 2003 ie:

Dr Gen Expenses £ 700
Cr Prepayments £ 700

Being prepayment reversal Y/e 2003

And to create the accrual for 2004 would:

Dr Gen Expenses £ 210
Cr Accruals £ 210

Being Gen. Expenses Accrual Y/e 2004

Basically, you had it right :001_smile:

rachy1975

ill have to remember that...not got that far on my course yet

:001_smile:

jewels.p

crispy wrote: »

Hello,

You are correct to add both the £700 and £210 for the expense account, this is becuase for the accounts y/e 2004 you are reversing the prepayment created in y/e 2003 ie:

Dr Gen Expenses £ 700
Cr Prepayments £ 700

Being prepayment reversal Y/e 2003

And to create the accrual for 2004 would:

Dr Gen Expenses £ 210
Cr Accruals £ 210

Being Gen. Expenses Accrual Y/e 2004

Basically, you had it right :001_smile:

Thanks. Will have to watch out for that in the Exam as in the work I've done so far it has been a case of adding one and deducting the other.

Think thats why I was unsure if I was correct or not.:001_smile:

jewels.p

rachy1975 wrote: »

ill have to remember that...not got that far on my course yet

:001_smile:

I thought I had Accruals/Prepayments sussed but that confused me a bit!:001_smile:

A-Vic

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