Week 2 - Accruals and Prepayments Flashcards
1
Q
What may we replace trade payables with if we need to account for an expense that happens before a year-end?
A
Replace crediting trade payables with crediting accruals
2
Q
What is the accrual recognised in?
A
The statement of financial position
3
Q
What does the accrual represent?
A
An obligation to make a payment in the future
4
Q
When is an accrual needed?
A
Whenever an entity has received goods or services before the year end, but has not recorded the related expense because they haven’t received the invoice or paid for them yet
5
Q
What does in arrears mean?
A
When the business receives invoices periodically after the services have been delivered
6
Q
What does in advance mean?
A
When the business receives invoices periodically before the services have been delivered
