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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Accruals and Prepayments.
Which of the following statements is false?
A. Accruals decrease profit
B. Accrued income decreases profit
C. A prepayment is an asset
D. An accrual is a liability
Please explain why is it B? why not C or D? Also, the double entry for B..I am not able to get? DR Accrued Income ( sofp) CR Income ( p/l) which will increase profit.
C and D are definitions and are both correct definitions.
Accrued income is income for the current year which has not yet been received and is therefore still owing to us. Because it is income belonging to the current year it needs recording for the current year and will increase profit (not decrease it).
The double entry is as you have written.
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