Module 6 Flashcards
What is an accrual?
an expense incurred for which no invoice has been received or no payment has been made.
Remember pro rating
What are the journal entries when an entity recognises an accrual?
Dr P&L- expenses
Cr Accruals
what are the journal entries when an entity recognises an invoice for an expense incurred in the prior period?
Dr P&L- expenses
Cr Trade creditor
Dr Accruals
Cr P&L- expenses
What is a prepayment?
an expense not yet incurred for which an invoice has been received or a payment has been made in advance.
What are the journal entries when an entity recognises an invoice for an expense not yet incurred?
Dr P&L- expenses
Cr Trade creditor
Dr Prepayment
Cr P&L- expenses
How is the prepayment reversed in the following period?
Dr P&L- expenses
Cr Prepayment
What is accrued income?
income earned for which no customer invoice has been issues or no payment has been received.
(asset)
what are the journal entries to record accrued income?
Dr Accrual
Cr P&L - sales/other income
how is accrued income reversed?
Dr Trade debtors/Bank
Cr Accrued income
What is deferred income?
income not yet earned for which a customer invoice has been issued or payment has been received in advance.
what are the journal entries to record deferred income?
Dr Trade debtors
Cr P&L - sales/other income
Dr P&L -sales/other income
Cr Deferred income
how is deferred income reversed?
Dr Deferred income
Cr P&L -sales/other income
How is VAT treated when it comes to accruals, prepayments, deferred income and accrued income?
Recognised EXCLUSIVE of VAT.
