My mind has gone blank at the last minute!!!

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
If ive got a BF prepayment in this years set of accounts, I debit the expense Acc with that yeah? Because last year i credited it from the expense so this year i will need to add it on?

Chris.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:My mind has gone blank at the last minute!!!

    Not going to answer that as Im so wound up I cant think straight ....
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:My mind has gone blank at the last minute!!!

    Not going to answer that as Im so wound up I cant think straight ....
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:My mind has gone blank at the last minute!!!

    Hi Chris
    Donot panic. I am sure if you approach it calmly, you will be able to remember it. I will try and answer it for you:
    If ive got a BF prepayment in this years set of accounts, I debit the expense Acc with that yeah?
    No, prepayments are in effect your assets until you use the expenses they are paid for. If say you pay 3-monthe's rent from next year's, that will be taken from the expense account(credited) and goes into the balance sheet as a current asset item. And when you deal with next year's accounts, the prepayment amount goes back to the credit side of the Expense account you are working on.
    Because last year i credited it from the expense so this year i will need to add it on?
    No, you credited it because it was part of next year's payment. Say your next year's Rent bill is £1200 and you've got £300 already prepaid lastyear, this year's actual cash paymant will only be £900 eventhough your P&L account shows £1200. If your are always paying Rent in advance, say 3 monthes ahead, then your cash payment will be £1200 and another £300 in Prepayments at hte end of the year to be credited and taken to the balance sheet.
    Hope that helps
    Tom

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