General query

This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.

Viewing 4 posts - 1 through 4 (of 4 total)

Author

Posts
August 23, 2021 at 6:38 pm #632656

James124
Participant

(1) Accruals
(2) Prepayment

These are cashflow items or Income Statement items or both.

Please define both separately.

August 24, 2021 at 9:17 am #632714

John Moffat
Keymaster

An accrual is an expense for the period that has not yet been paid. It therefore is part of the total expense on the Statement of Profit or Loss and is also a liability on the Statement of Financial Position.

A prepayment is where an expense has been overpaid during the period. It is therefore not part of the total expense on the Statement of Profit or Loss and is an asset on the Statement of Financial Position.

They are both relevant for Paper FA rather than Paper MA, and are explained in detail in our free Paper FA lectures.

August 24, 2021 at 12:19 pm #632738

James124
Participant

Tutor, yes, I mistakenly wrote in MA instead of FA.
Prepayment would be shown as cash outflow in Statement of cashflow. However, Accrual would be shown as expense in income statement.
Am I right sir?

August 24, 2021 at 3:08 pm #632757

John Moffat
Keymaster

No.

I wrote in my previous reply the statements that they affect.

You must watch my free lectures on accruals and prepayments where it is all explained in detail.

The lectures are are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Author

Posts

Viewing 4 posts - 1 through 4 (of 4 total)

The topic ‘General query’ is closed to new replies.