accruals & prepayments

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:31AM in AAT student discussion
Hi can ayone tell me why it is necessary to adjust the year end figurs for accruals and prepayments.

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:accruals & prepayments

    Hi you need to adjust for prepayments and accruals because you are not to account for things paid for in the next accounting period and you are to account for payments which relate to the accounting year which has not yet been payed for.

    i.e rent paid in advance for three months dec-feb at the end of year you only account for dec but as you have already paid for jan-feb then this is a prepayment.

    Wages overtime due for dec but not yet paid and will be paid in jan will then be classed as an accrual as it is due for year end accounting period.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:accruals & prepayments

    FRS 18 - the Matching Concept.

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:accruals & prepayments

    It is necessary to do this to comply with the matching concept of FRS 18? Income must be matched with the expenses incurred to provide it.

    Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:accruals & prepayments

    Thanks that is a great help to me. thank you.

Categories

Privacy Policy