Can someone explain?

Why are we subtracting the accruals of expenses at the start of the financial year from the carrying amount of the non-current asset and then adding the accruals of expenses at the end of the financial year?



Comments

  • Duchess1
    Duchess1 Registered Posts: 85
    you accrue expenses at the end of the period & then reverse them at the beginning of the next period...
  • CSan89
    CSan89 Registered Posts: 207
    The accruals B/fwd are the accruals that were made in the previous years accounting records.

    So for example, you could have had a telephone bill for 1200 which was for the period Feb, Mar and Apr x8. In this case 800 would belong in March x8 accounts but the money would not be taken out until after that year end.

    To follow on, the telephone bill for Feb-Apr x9 could have been 900 but this would have been paid in next years accounts so you need to do an accrual of 600.

    AAT Level 2&3 - 2016
    AAT Level 4 - 2017
    Personal Tax, Business Tax and External Auditing

    ACA/CTA -
    Certificate Level - Jan 2019
  • paulawelsh
    paulawelsh Registered Posts: 12
    Hi
    Accrals and prepayment are temporary ledgers that are used only at the end and start of the year
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