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Month end adjustments

chinnickchinnick New MemberRegistered Posts: 9
This may seem like an obvious question but since my training I have not been involved in any month end processes so I want to reinforce my thoughts.

I know the basis of accruals an prepayments but can someone confirm my thinking on the following example?

We have a lease for equipment which is invoiced quarterly in advance. This invoice for £600 is dated in month 1 so is entered onto the accounting system with this date.

When doing month end for month 1 there is a £600 expense so I should put £400 to assets as a prepayment?

When doing month end for months 2 and 3 there is no invoice flagged (because it is in month 1) so how am I showing the £200 expense?

Any advice is appreciated because my mind has gone blank.

Andrew

Comments

  • coojeecoojee Experienced Mentor Registered Posts: 794
    In Months 2 & 3 you reverse the Pp. In Month 2 you DR the expense and CR the Pp with £200 so you get the £200 expense and the Pp is now reduced to £200. Then in Month 3 you DR the expense and CR the Pp with £200 leaving nothing in Pp's and a £200 expense
  • coojeecoojee Experienced Mentor Registered Posts: 794
    Thanks for the help, coojee. No probs coojee.
  • chinnickchinnick New Member Registered Posts: 9
    I've only just come back into work after the bank holiday so thanks coojee indeed :)
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