Accruals/Prepayments

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jewels.p
jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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

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  • rachy1975
    rachy1975 Registered Posts: 366 Dedicated contributor 🦉
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    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
    crispy Registered Posts: 466 Dedicated contributor 🦉
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    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
    rachy1975 Registered Posts: 366 Dedicated contributor 🦉
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    ill have to remember that...not got that far on my course yet

    :001_smile:
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    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
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    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
    A-Vic Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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    Try Here

    http://www.aat-interactive.org.uk/elearning/el5_8/player.html

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