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Hi Sir,
When a company is to be liquidated within one year and thus the accounts have to be prepared on a break up basis, would you account for accruals or prepayments please?
Regard
MaryliseIf you want a tutor to answer your post please choose the Ask ACCA Tutor forum.
“Break up” or “liquidation” basis means that you show all assets at a recoverable/realisable amount – so you may not have prepayments any more because if the company has ceased to trade there is no future benefit for a prepaid expense – so it get’s written off/is not carried forward as an asset.
However, you might still have accruals e.g. because there could be liabilities for which invoices have still to be received.
Here is an example https://www.sunpharma.com/sites/default/files/company/2016/Sun-Pharmaceuticals-UK-Limited.pdf – you will see that there are no non-current assets because everything becomes current – and no long-term liabilities because all liabilities are now due within one year. And in the notes – there are no prepayments – but there are accruals.
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