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Dear Lecturer,
I would like to ask you a question.
For example, my year end for the financial statements is 31 December 2019 . I have recognised the accrued bonus of $1200 for the year ended 31 December 2019, so the double entry is :
Dr Bonus Expense
Cr Accrued BonusThis bonus is subsequently paid in next year on Feb 2020.
So, my double entry on Feb 2020 should be :
Dr Accrued Bonus , Cr Cash or What if there is any under or over accrual ?
I look forward to hearing from you.
Thank you Lecturer.
Best regards,
Manirak
You can deal with it in more than one way (although the end result is obviously the same).
The standard way is immediately at the start of the new year to Dr Accrual Cr Bonus expense.
Then when the cash is paid: Cr Cash Dr Bonus expense.(Although in the exam it is unlikely you will be asked for the actual double entries involved)
I do suggest that you watch my free lectures on accruals and prepayments. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Lecturer, in this case,
If I just : Dr Accrued Bonus , Cr Cash at the new year period when the cash is paid , is it correct without recognizing any bonus expense in the new year ?
How to deal with any under or over accrual ?
Yes, that is fine because the end result is the same. (Although as I wrote before, there is very little double entry tested in the exam).
I explain how we deal with over/under accruals in my free lectures on accruals and prepayments.
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