Opening prepayments/opening accruals.

WillowB wrote: »

Hi,
Just a quick question, as I can't seem to find an answer for this...I understand opening
prepayments are a debit on the expense account, and opening accruals are a credit in the expense account, but where do I put these opening prepayments and accruals in an income account? Thanks for reading.

You're unlikely to come across accruals and prepayments in an income account but it is possible. You can accrue for rent not yet received and the entry at the end of the year would be DR Accrued Income (is actually treated the same as a prepayment) and CR rent received account. Therefore to reverse it at the start of the next year you would DR Rent Received and CR Accrued Income, Similarly a tenant may have paid rent in advance so you'd need to prepay it. The entries at the end of the year would be DR Rent received and CR Prepaid Income (treated the same as accruals).To reverse it at the start of the following year you would DR Prepaid Income and CR Rent Received.

I hope this helps. When you're deciding whether to DR or CR accounts think about what effect you want to have on the account. Do you want to increase or decrease the balance on it. Accruing for rent due but not yet received needs to increase the rent received account, rent received is an income account and to increase an income account we CR it, therefore accrued rent received at the end of the year is a CR entry.