Professional Documents
Culture Documents
Accruals and Prepayments
Accruals and Prepayments
Accrual Concept:
Expenses and income should be recorded in the year in which it is incurred or earned not in the year in which cash is
paid or received.
• Accrued Expenses
• Accrued Income
Accrued Expenses:
Cash Expense
Dr. Expense xxx -- Income Statement
Cr. Cash xxx -- Balance Sheet (Current Asset)
Accrued Expense
Dr. Expense xxx -- Income Statement
Cr. Accrued Expense xxx -- Balance Sheet (Current Liability)
Expense
Accrued Income:
Cash Income
Dr. Cash xxx -- Balance Sheet
Cr. Income xxx -- Income Statement
Accrued Income
Dr. Accrued Income xxx -- Balance Sheet (Current Asset)
Cr. Income xxx -- Income Statement
Income
o/b (accrued Income) xxx Cash xxx
• Accrued Expense increases the amount of expense in income statement by adding in expenses.
• Accrued Income increases the amount of income in the income statement by adding in income.
Prepayments:
• Prepaid Expense
• Pre-Received Income
Prepaid Expense:
Cash Expense
Dr. Expense xxx -- Income Statement
Cr. Cash xxx -- Balance Sheet
Prepaid Expense
Dr. Prepaid Expense xxx -- Balance Sheet (Current Asset)
Cr. Expense xxx -- Income Statement (Expense)
Expense
o/b (prepaid expense) xxx XXX -- Income Statement as an
Expense
Cash xxx
c/d (prepaid expense) xxx
Pre-received Income:
Cash Income
Dr. Cash xxx -- Balance Sheet
Cr. Income xxx -- Income Statement
Pre-received Income
Dr. Income xxx -- Income Statement
Cr. Pre-received Income xxx -- Balance Sheet (Current Liability)
Income
o/b (pre-received income) xxx
XXX -- Income Statement as an
Income
Cash xxx
c/d (pre-received income) xxx