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Accruals and Prepayments (part b) – ACCA Financial Accounting (FA) lectures

VIVA

Reader Interactions

Comments

  1. halima2023 says

    May 13, 2023 at 11:59 am

    Thank you sir .

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  2. orcist123 says

    March 6, 2023 at 11:24 am

    Sir, I have a question. You said that when we entered the new year, accountant will reverse the double-entry and we will now have Prepaid: $1,000. But now if the co. shut down before the expire date of prepaid exp (30/6/X2), suppose it does so at the end of March, then what entry should we make to record this transaction in which the insurance co. repays our prepaid part and expense from Jan to March. Sorry for my bad grammar and ty anyone who replies.

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  3. hetalpatel1 says

    November 4, 2022 at 12:55 pm

    Hello, could you please tell me where I can get a used study textbook for the FA 2022-23 financial reporting exam?

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    • John Moffat says

      November 5, 2022 at 8:33 am

      Try asking in the Buy and Sell Books forum on this website 馃檪

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  4. LaraP says

    November 4, 2022 at 11:15 am

    Dear John Moffat,
    thank you very much for your lectures. I now understood how prepayment and accuals works but now, I’m very confused when I have to work with all four of them; prepayment expenses with prepayment income and accrual expenses with accrual income. Could you please explain those others two please?

    Thank you,
    Kind regards,

    Lara

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    • John Moffat says

      November 5, 2022 at 8:33 am

      It is exactly the same logic as the way we deal with expenses, but instead we are dealing with income 馃檪

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  5. Irv.12 says

    February 8, 2022 at 8:38 am

    When talk about prepayments such as monthly internet subscription where you pay before you consume it. Do you have to go through the whole book keeping process of placing in prepayments at the start of the month and then expensing it at the end of the month?

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    • John Moffat says

      February 8, 2022 at 3:05 pm

      No. Any prepayments are sorted out only at the end of the year. (Some companies deal with them every month because they prepare monthly accounts, but that will never be the case in the exam.)

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  6. basilahamed4 says

    April 1, 2021 at 5:42 pm

    Thank you very much Sir for the beneficial lectures.

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    • John Moffat says

      April 2, 2021 at 8:34 am

      You are welcome 馃檪

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  7. tkhue3296 says

    August 14, 2020 at 6:02 am

    actually i found a mistake in the note page 25,
    Example 3 paragraph 2,
    it printed 12 June 2001 ,
    is it suppose to be 01 June 2001 ?

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    • John Moffat says

      August 14, 2020 at 9:33 am

      No, it is not a mistake.

      It does not matter when the cash was paid, it is the period that it is paid for that matters.

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  8. shubhajitghoshal says

    June 17, 2020 at 10:32 am

    Hello Sir John

    First of all, excellent lectures. Very comprehensive and precise. I have a question in terms of the journal entries for the prepayment and accruals. I am mentioning them below. Would be great if you could advise if my understanding is correct and if the JE’s make sense and can be considered as the correct way of recording these transactions:

    For Year ending Dec 2000

    DEBIT Expense (Insurance) 1800
    DEBIT Prepayment (Insurance) 1000
    CREDIT Cash 2800

    For Year ending Dec 2001
    DEBIT Expense (Insurance) 1200
    CREDIT Prepayment (Insurance) 1000
    CREDIT Cash 1200

    DEBIT Prepayment (Insurance) 1200
    CREDIT Cash 1200

    Also, can the year ending Dec 2001 entries be summarized as below:
    DEBIT Expense (Insurance) 2200
    DEBIT Prepayment (Insurance) 1000
    CREDIT Cash 2400

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    • sbennett says

      June 20, 2020 at 9:10 pm

      This is not the subject in here, but I will show you one example of Journal Entry.

      1 Jan 2000 to 31 December 2000

      Cr Cash 2,800
      Dr Insurance Expense 2,800
      Dr Prepaid Insurance 1,000
      Cr Insurance Expense 1,000

      You need to learn double-entry bookkeeping.
      I hope this answers your question.

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    • shazia786 says

      June 15, 2021 at 10:51 am

      Double entry for DR & CR should always match, the last one doesn’t match i.e.

      Also, can the year ending Dec 2001 entries be summarized as below:
      DEBIT Expense (Insurance) 2200
      DEBIT Prepayment (Insurance) 1000
      CREDIT Cash 2400

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  9. Abebe.Walcott says

    June 12, 2020 at 10:49 am

    Very Clear. Thank you sir. I aspire to be very versed as you one day.

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    • John Moffat says

      June 12, 2020 at 3:19 pm

      Thank you for your comment 馃檪

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  10. b2018 says

    February 28, 2020 at 2:11 am

    Amazing, Thanks

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  11. mshahmir says

    December 6, 2019 at 11:31 am

    why we took 1000 as previous prepayment from 1 jan to 31 jul instead of 1200?

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    • Erumfazal says

      February 24, 2020 at 8:20 am

      From 1 Jan to 30 Jun, the prepayment was taken because it was paid for last year.
      As for the 1200, that didn’t include the first 6 months. We paid 1200 for 1jul 2001 to 30 Jun 2002.

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  12. ngocbaophamm says

    October 6, 2019 at 9:40 am

    Dear Sir,

    It is still confusing for me that why prepayment of last year is still added in this year?

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    • John Moffat says

      October 6, 2019 at 1:45 pm

      If you prepaid last year it means that you paid already for part of this year. So the amount prepaid is part of this years expense.

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  13. shuaibi says

    August 16, 2019 at 5:39 am

    How do we know that part of the insurance is prepayments at the end of the year if we only credit cash and debit insurance when the transaction happened?

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    • John Moffat says

      August 16, 2019 at 8:58 am

      Because always with insurance you will know what period you are paying for – it will be on the invoice!

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      • shuaibi says

        August 16, 2019 at 9:28 am

        I see, thanks a lot

    • shuaibi says

      August 16, 2019 at 9:27 am

      oh, I’ve got that, thanks for this useful video

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  14. munyandekwe says

    October 13, 2018 at 9:07 pm

    do we only have four adjustments before the preparation of financial statements?

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    • John Moffat says

      October 14, 2018 at 10:22 am

      There are the four ‘standard’ adjustments that always need to be made. In addition, of course, any errors discovered will be corrected, but that is a separate issue – a correction rather than an adjustment.

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  15. Vivian A. Monye says

    August 15, 2018 at 8:13 pm

    Really detailed.

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