Chapter Six- Accruals and Prepayments

Question 1

Accrual

Answer 1

Expense or income that has been incurred or earned during the period but has not yet been invoiced or paid/received

Question 2

Accruals Principle

Answer 2

A fundamental accounting principle that states that income and expenses shown in the statement of profit or loss should be those that were earned or incurred during that period rather than just the cash received or paid

Question 3

Accrued Expenses

Answer 3

Expenses that have been incurred during the period but that have not yet been invoiced or paid, e.g., expenses in arrears

Question 4

Accrued Income

Answer 4

Income that has been earned but that has not yet been invoiced or received, e.g., income in arrears

Question 5

Prepaid Expenses

Answer 5

Expenses that have been paid for but relate to the following accounting period, e.g., expenses paid in advance

Question 6

Prepaid Income

Answer 6

Income that has been received but relates to the following accounting period, e.g., income in advance

Question 7

Prepayment

Answer 7

Expense that has been paid for or income that has been received but relates to the following accounting period