L4- Accruals and Prepayments

Question 1

Define Prepaid Income/ Deferred Income

Answer 1

Income that has been received for another accounting period but not yet earned.

Question 2

Define Prepayments

Answer 2

Expenses paid ahead of the current accounting period though it will be used in the following period.

Question 3

Define Accrued Income

Answer 3

Income that has been earned during the accounting period but has not yet been collected.

Question 4

Define Accrued expenses.

Answer 4

Expenses incurred during the accounting period that has not yet been paid for.

Question 5

How does accruals and prepayments affect profits?

Answer 5

Accruals (Liabilities)= ↑ Exp./ Income = ↓ Profits/ N.A
Prepayments (Assets)= ↓ Exp. / Income = ↑ Profits

Question 6

What is the double entry for Accrued Exp.

Answer 6

Dr. Individual Exp. a/c (SOPL)
Cr. Accruals a/c (SOFP)

Question 7

What is the double entry for accrued income?

Answer 7

Dr. Accrued Income a/c (SOFP)
Cr. Individual Income a/c (SOPL)

Question 8

What is the double entry for prepaid expenses?

Answer 8

Dr. Prepayment (SOFP)
Cr. Expense a/c (SOPL)

Question 9

What is the double entry for Prepaid Income?

Answer 9

Dr. Income a/c (SOPL)
Cr. Prepaid Income (SOFP)