Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Prepayments and accruals
- This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
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- July 10, 2019 at 10:50 pm #522447
Hello sir, thank you very much for your lectures. I am a little bit confused with this chapter. Why do we correlate the transactions with the payments? Maybe we receive the invoice but we don’t pay it.
For a prepayment for example, e.g. insurance we receive the invoice at the start of the interval of the insurance. Why don’t we Dr insurance and Cr payables the whole amount of the invoice? After that, we can move the balance from payables to the prepayment account and record the payment(s) when they occur in payables account. The same with accruals. Thank you very much for your help again.July 11, 2019 at 7:40 am #522498The double entries can be done is several ways – there is no rule – provided they end up with the correct charge to the SOPL and the correct balance for the SOFP at the end of the period. I show in my lectures the standard entries.
What is important is that the expense in the SOPL is the actual expense for the period, regardless of how much was paid.
July 11, 2019 at 1:50 pm #522613The you very much sir. I just got confused with the wording in the definition of not paid etc.
July 12, 2019 at 7:16 am #522695You are welcome 🙂
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