Accruals and Prepayments Flashcards
What is an accrued expense?
Expenses that are charged against the profit for a particular period even though they are yet to be paid for.
What is a prepaid expense?
Expenses that have been paid for but will not be used until the next year.
Where are accrued expenses found on the statement of financial position?
Current liabilities.
Where are prepaid expenses found on the statement of financial position?
Current assets.
How do you reverse an accrual in the next year?
Debit the accrual.
Credit the expense.
How do you reverse a prepayment in the next year?
Debit the expense.
Credit the accrual.
What is accrued income?
When income has been earned during the accounting period but not yet invoiced or received.
Where will you find accrued income on the statement of financial position?
Current asset.
What is deferred income?
When income is received in advance of it being earned.
Where will you find deferred income on the statement of financial position?
Current liability.
