Prepayments/Accruals /SOCI/SOFP

An accrual is a ............... for services that have already been used but that have not yet been invoiced to the business e.g. electricity bills that have not yet been paid

• liability

• Income

• expense

• asset

Describe the effects on Accounts of the Accruals of expenses

• Dr Current Liabilities (other payables will decrease)

• Cr Current Liabilities (other payables will increase)

• Dr the relevant Expenses Account (Wages/Rent)

• Cr the relevant Expenses Account (Wages/Rent)

A prepayment arises when an expense is paid in advance and all or part of the payment relates to the next accounting period e.g. rates/water/electricity

• True

• False

State the effect on Accounts of Prepayments of Expenses

• Dr Current Assets (other Receivables increases)

• Cr Current Assets (other Receivables decreases)

• Cr the relevant Expenses Account (Wages/Rent) as expenses down

• Dr the relevant Expenses Account (Wages/Rent) as expenses go up

How would this be dealt with in the Final Accounts ; Commission due but not yet received £135

• Dr Current Assets £135 (other receivables up)

• Cr Current liabilities £135 (other payables up)

• Cr Commission Received Account £135 (Revenue up even though not yet received)

• Dr Commission Received Account £135 (Revenue down as it has not been received yet)

Commission Received is £1 200. However, only £1 000 has been given. How would this (Accrued Income Question) be dealt with in the Accounts (pick four)

• Dr Bank £1 000 as Cash up

• Cr Commission Received Account £1 000

• Cr £200 Accrued Income in the Commission Received Account

• Dr £200 Current Assets

• Dr Commission Received Account £1 000

Prepayments postage £110. How would this be dealt with in the accounts?

• Dr Current Assets £110

• Cr Postage Account £110

• Dr Postage Account £110

• Cr Current liabilities £110

Accrued expenses Wages £185. How would this be dealt with in the accounts?

• Cr Wages Account £185

• Dr Wages Account £185

• Cr Current Liabilities £185

• Dr Current Assets £185

If a tenant pays their rent/commission in advance, then this is Prepayment of Income

• True

• False

Opening Inventory + Purchases – Purchase Returns - ................................ + Carriage inwards – Closing Inventory​