9: Accruals and Prepayments

Question 1

What are accruals? and the double entry

Answer 1

A liability for expenses to be charged against a particular period even though they have not been paid for.

Dr Expense (P/L)
Cr Accruals (Liability in SOFP)

Question 2

What are prepayments and the double entry?

Answer 2

An asset relating to expenses that have been paid in advance.
Dr prepayments (Asset in SOFP)
Cr Expense (P/L)

Question 3

How to reverse opening accrual?

Answer 3

Dr Accrual
Cr Expense

Question 4

How to reverse opening prepayment?

Answer 4

Dr expense
Cr prepayment

Question 5

What is accrued income? Double entry?

Answer 5

Receipt of income is in arrears at the end of the year e.g. missing income
Dr accrued income (asset in SOFP)
Cr Revenue/other income

Question 6

What is deferred income? Double entry

Answer 6

Income has been received in advance of delivering goods/services.
Dr Revenue
Cr Deferred income (liability in SOFP)