• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Effect of prepayment on profit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Effect of prepayment on profit

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • September 3, 2021 at 12:29 pm #634140
    Sidra360
    Member
    • Topics: 4
    • Replies: 3
    • ☆

    Sir, I know prepayment is an asset (for the person who paid) and it increases the profits.

    But logically, how?

    As an example: Let’s say if our current profits are $10,000 then we made a prepayment of $2000 then will it increase our profits up to $12,000? or will remain $10,000?

    I’m not getting the reason.
    It will increase prepayments or assets and will reduce the cash with the same amount but the reduction of cash has no link with profits.

    Can you please explain ?

    September 3, 2021 at 4:23 pm #634163
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    If the prepayment had been made during the year but had not been recorded, then recording it will increase the profit.

    The expense account is debited with the total cash paid. If some of the cash is a payment for next year (i.e. a prepayment) then only the balance of the cash paid is an expense for this year.

    Have you watched my free lectures on prepayments and accruals?

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • daliuske on Financial management objectives – ACCA Financial Management (FM)
  • ksmigulec on Management of Working Capital  – Introduction – ACCA Financial Management (FM)
  • tmatanga2008@gmail.com on IASB Conceptual Framework – Introduction – ACCA Financial Reporting (FR)
  • John Moffat on Capital asset pricing model (part b) – ACCA Financial Management (FM)
  • John Moffat on Capital asset pricing model (part b) – ACCA Financial Management (FM)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy