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Accruals/Prepayments

jewels.pjewels.p Font Of All KnowledgeRegistered Posts: 1,774
in AAT Level 3 (Level 6 in Scotland)
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

Comments

  • rachy1975rachy1975 Trusted Regular Registered Posts: 366
    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??
  • crispycrispy Trusted Regular SouthamptonRegistered Posts: 456
    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:
  • rachy1975rachy1975 Trusted Regular Registered Posts: 366
    ill have to remember that...not got that far on my course yet

    :001_smile:
  • jewels.pjewels.p Font Of All Knowledge Registered Posts: 1,774
    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.pjewels.p Font Of All Knowledge Registered Posts: 1,774
    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:
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