- Worksheet and Own Solved Mark Scheme
- Accruals and Prepayments (Expense) - Concepts
- Accrued and Prepaid Expense - Solved Past Papers - Part 1
- Accrued and Prepaid Expense - Solved Past Papers - Part 2
- Accruals and Prepayments (Income) - Concepts
- Accrued and Prepaid Income - Solved Past Papers
What you'll learn
- Accrued Expenses (Owing, Outstanding, Accruals etc)
- Prepaid Expenses (Advance)
- Accrued Income (Owing, Outstanding, Accruals etc)
- Prepaid Income (Advance)
Description
You will learn these Concepts in this FREE Course
Accruals and Prepayments
Accrued and Prepaid Expense Concept
Expense Ledger Account
Accrued and Prepaid Income Concept
Income Ledger Account
Income Statement Extract
Statement of Financial Position Extract
Accounting Principles
Practice Question (Past Exam Papers)
Other payables and other receivables
• recognise the importance of matching costs and revenues
• prepare ledger accounts and journal entries to record accrued and prepaid expenses
• prepare ledger accounts and journal entries to record accrued and prepaid incomes
Accruals concept
The accruals concept is identified as an important accounting concept by IAS 1 Presentation of Financial Statements. The concept is that income and expenses should be matched together and dealt with in the income statement for the period to which they relate, regardless of the period in which the cash was actually received or paid. Therefore all of the expenses involved in making the sales for a period should be matched with the sales income and dealt with in the period in which the sales themselves are accounted for.
Sales revenue
The sales revenue for an accounting period is included in the income statement when the sales are made. This means that, when a sale is made on credit, it is recognised in the income statement when the agreement is made and the invoice is sent to the customer rather than waiting until the cash for the sale is received. This is done by setting up a receivable in the statement of financial position for the amount of cash that is due from the sale (debit receivables and credit sales revenue).
Purchases
Similarly purchases are matched to the period in which they were made by accounting for all credit purchases when they took place and setting up a payable in the statement of financial position for the amount due (debit purchases and credit payables).
Cost of sales
The major cost involved in making sales in a period is the actual cost of the goods that are being sold. As we saw in a previous chapter, we need to adjust for opening and closing inventory to ensure that the sales made in the period are matched with the actual costs of those goods. Any goods unsold are carried forward to the next period so that they are accounted for when they are actually sold.
Expenses
The expenses of the period that the business has incurred in making its sales, such as rent, electricity and telephone, must also be matched with the sales for the period. This means that the actual expense incurred in the period should be included in the income statement rather than simply the amount of the expense that has been paid in cash.
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About the instructors
- 3.82 Calificación
- 1396 Estudiantes
- 9 Cursos
Ahmed Raza Dharolia (ARD)
O/A Level Accounting Teacher
Sir Ahmed Raza Dharolia ‘ARD’ is an Educationist, a Trainer & an Entrepreneur. His experience, consistency, skills and resources have produced honorable grades in CAIE O/A Levels Accounting and other professional Qualifications like ACCA, CA, CIMA, PIPFA, HDA/HND & ACT.
Apart from his hard work on students and 10 years of teaching supremacy, his resources includes online video lectures, classified notes and solutions to problems which are accessible by students through social media channels like Whatsapp, facebook, his website etc.
Currently he is subject head for O/A Levels Accounting at The City school Johar Campus where he managed to produce best O Levels Accounting result in CAIEs.
In the past has also worked for BIG Professional Colleges including Mirchawala’s, Al-Hamd Academy, SKANS etc. He also served as Principal and Permanent Faculty at Escribir College Karachi.
Sir Ahmed also holds 6 Distinctions in ACCA Papers.
2 of his students have also secured a Distinction (A Level Accounting) in Pakistan.