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from the notes,i know that accrual is a kind of current liability,why sometimes it is at debit side?
Is that prepayment means that something that u already paid early?
To make an accrual you:
1 Increase an expense, because you have incurred the expense but not paid for it (therefore Dr expense)
2 Set up, as oyu say, a current libility (the accrual). This recognises that you owe someone money even though you might not have been invoiced for a service (therefore Cr Accruals/liabilities).
A prepayment, as you say, is something that you have paid early. For example, in the UK people often pay car insurance up front. The double entry for the payment would be:
Dr Insurance $1,200 (say)
Cr Cash $1,200However, three months into the year you have only ‘consumed’ or ‘used’ three months’ of insurance and the other 9 months’ would be a prepayment:
Dr Prepayments (an asset because the insurance company has been paid in advance) $900
Cr Insurance $900This leaves only $300 still insurance as an expense for the three months.
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