Accruals & Prepayment

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I really must be having a bad day - my mind has gone completey blank - and the more i think about it - the more confused i get.<BR>Please can someone tell me the double entry for Accruals & prepayment.<BR>i know as soon as someone tells me it will all come flooding back ! he he<BR>Sarah x

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Accruals & Prepayment

    For a prepayment<BR><BR>DR Prepayments (balance sheet)<BR>CR Expense account (P&L)<BR><BR>For an accrual<BR><BR>DR Expense account (P&L)<BR>CR Accruals account (balance sheet)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Accruals & Prepayment

    Thank you so much for your quick response Nicky!!<BR>I think i have been doing so much studying and getting a mental block he h<BR>Thanks again<BR>S x
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Accruals & Prepayment

    No problem. Glad to help.<BR><BR>Are you OK with working out prepayment/accrual values i.e how much needs to go through the P&L account and how much stays on the balance sheet ?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Accruals & Prepayment

    I think so.<BR>In the question i am stuck on - our year end is 31st March 04 and we paid rates on the 1st Feb 2004 for £488.10 for the three months to 30th April. These are to be posted to the Administration Account<BR>So i divded the figure by 3 488.10 /3 = 162.70<BR>So we prepaid £162.70 for the month of April<BR>Do i post <BR>DR Prepayments £162.70<BR>Cr Administration Acc £162.70<BR><BR>Dr Administration Acc £488.10<BR>Cr Bank £488.10<BR>???
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Accruals & Prepayment

    Not exactly right...........<BR><BR>You receive invoice in Feb.<BR><BR>1. Enter invoice <BR><BR>DR Prepayments (B/S) 488.10<BR>CR Creditors (B/S) 488.10<BR><BR>2. Jnl Amount relating to Feb <BR><BR>DR Admin a/c 162.70<BR>CR Prepayments 162.70 (this leaves 325.40 in prepayments which is the p/p for Mar and April)<BR><BR>3. In Mar, jnl amount relating to Mar<BR><BR>DR Admin a/c 162.70<BR>CR Prepayments 162.7 (leaves 162.70 in prepayment which is the p/p for April)<BR><BR><BR>So at year end the balance on your prepayments is 162.70 as this relates to April which hasn't happened yet.<BR><BR>In April, you'll just repeat step 3 which will then take your prepayments down to zero.<BR><BR>Hope this helps.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Accruals & Prepayment

    I'm now confused why you would enter the initial rates invoice as a prepayment (B/S) in full and as an accrual on the B/S as well.<BR><BR>Why wouldn't you post the rates invoice to Admin in full - as the rates have been paid (per the question) this would have already been credited to the bank. Therefore the prepayment journal would be dr prepayments with £162.70, and credit the admin account with £162.70, thus bring the actual rates cost incurred in the year to £325.40.<BR><BR>I could understand your journals if it said rates were due on the 1st Feb 04, but an invoice hasn't yet been received.<BR>

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