Main Concepts

Balance 1 Balance 2
b/d b/d
Accruals Concept - Profit is the difference
between revenues earned and the expenses Bank 3 Income ??????
incurred generating those revenues. Statement ?
Matching Concept - Only expenses and revenues
6
which relate to the current accounting period
should be matched against each other to Balance 4 Balance 5
calculate profit. c/d c/d

1 - Prepayment made at the end of last year

1. Accrued expenses / other payables 2 - Accrued expense at the end of last year
This is when we still owe money and should have 3 - The amount paid this year for the expense
paid during the financial year when the 4 - Accrued expense at the end of this year
transaction occurred. 5 - Prepayment made at the end of this year
The amount owing is added / debited to the 6 - the amount we need to find
expense.
The amount owing is a current liability.
Revenue ledger could look like this:
2. Prepayments / other receivables
This is when we have prepaid for the next
financial year. Balance 1 Balance 2
b/d b/d
The amount prepaid is subtracted / credited to the
expense. Income 6 bank 3
The amount prepaid is a current asset. statement ????????

3. Accrued revenue / other receivables Balance 4 Balance 5

c/d c/d
This is when we earned money but we still have
not received it yet.
The amount owing to us for the revenue earned 1 - Accrued income at the end of last year
must be added / credited to the revenue. 2 - Income received in advance at the end of last
The amount owing to us is a current asset. year
3 - The amount received this year for the revenue
4. Income in advance / other payables 4 - Income in advance at the end of this year
This is when we received too much money than 5 - Accrued income at the end of this year
we actually earned. 6 - the amount we need to find
The amount received in advance must be
subtracted / debited to the revenue.
The amount received in advance is a current
liability.

LATE EARLY

EXPENSE Accrued PrePayment

Expense (CL) (CA)

INCOME Accrued Income in

Income (CA) Advance (CL)

Expense ledger could look like this: