Accurals and Prepayments

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi

Wondered if anyone could help with an easy way of remembering the above?!

I totally understand the concept of it and understand where they go in the balance sheet - i.e prepayments are debtors = asset and accurals are a creditor = liablilities but when it comes to posting in the expense account i just cant get my head around it! Am I being totally dumb and not thinking about it right!

Is it because maybe I have to imagine and draw up the T-Accounts for the previous entries before I can get my head around the rest?!

Arrrggh! I think I need to keep practising at it - to be honest the Kaplan book does not give much help and I can do all the exercises in there - has anyone can any exercises they maybe can send me?

If so my email address is fluffy_babe2000@yahoo.co.uk

Thanks for any help received

Lou x

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accurals and Prepayments

    I'm not totally sure why you're having problems, Lou, as posting accruals/prepayments in the expense accounts seem to follow logically from how they're posted in the balance sheet.

    Prepayments are a debit balance in the prepayments a/c that gets posted to the balance sheet. Thus they are a credit entry in the appropriate expense account. This is what you would expect as prepayments are made for expenses not incurred for the given accounting period and should reduce the expenses balance posted to P&L.

    Accruals are the reverse. Expenses incurred but not yet invoiced/paid for need to be added to the expenses a/c so they're a debit.

    Hope that helps

    Chris
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accurals and Prepayments

    Hi Chris

    Thanks for that - I am not sure why I am having problems with it either - I know it but when you're posed with a question in front of you - my mind just goes blank!!

    I just got to remember the opening balance from previous year/month and take it from there! I know I know it but brain seizes up when I have a question in front of me!

    Just keep practicing is the answer!!

    Cheers

    Lou x
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accurals and Prepayments

    There were a few bits of FRA that took me a while to get me head around - accruals and prepayments being one - but as you say, it's just a matter of putting the practise in til you get it.

    Can't help with any practice material, I don't have anything in digital form.

    Chris

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