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Hi. There are questions in the exam kit about accrued and prepaid income but there is nothing on it in the lectures or notes. How do I deal with these questions?
You deal with them using the same logic as for accrued expenses and prepaid expenses.
If there is accrued income it means we are still owed money from the customer – so it is a debit balance.
If there is prepaid income it means we have been paid to much this period by the customer – so it is a credit balance.
If you have a problem with a specific question then say which question.
Are there separate accounts for prepaid income and accrued income or are they just recorded in the prepayments and accruals accounts? In the Kaplan exam kit (MCQ 154), the question states that the balances brought forward on the prepaid and accrued income accounts are so and so but in the answer for the question they showed the opening balances on the rent account instead. That’s what I don’t understand.
It does not matter which accounts you use. And in the exam you cannot be asked to produce t-accounts – it is a financial accounting exam not a booking exam and so usually it is easier not to bother producing t-accounts in your workings.
Again if you have a problem with a specific question then do say and then I can explain 🙂
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