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Hallo and Happy new year,
May I ask, I read in the open tuition notes, the following about prepaid expense, as 3 entries:
1. Dr Expense a/c (I/S)
Cr Cash2. Dr Prepayments (B/S)
Cr Expense a/c (I/S)3. Dr Expense a/c (I/S)
Cr PrepaymentsBut, I also read elsewhere, that it is possible to do it with 2 entries:
1. Dr Prepayments (B/S)
Cr Cash2. Dr Expense a/c (I/S)
Cr Prepayments (B/S)My Q: why is it necessary to work with 3 entries, when it can do with 2?
Thank you!
I don’t know where you read that, but it is not very sensible or practical.
It is the bookkeepers job to record every time we pay any cash.
It is the accountants job at the end of the period to then calculate how much of the payment is a prepayment and to make the adjusting entries.
For the exam it is not really relevant anyway because the questions are not testing the t-accounts.
Hallo,
I’ve read some online websites for accounting, and this is what they were saying.
I haven’t studied much accounting, and sometimes is hard to learn F3, without knowing the accounting
Could you tell me if the following entries are correct, I used the open tuition as an example:
If we have accrued income:
1. Dr Cash B/S
Cr Income a/c I/S2. Dr Accrued income B/S
Cr Income a/c I/S3. Dr Income a/c I/S
Cr Accrued income B/SIf we have prepaid income:
1. Dr Cash B/S
Cr Income a/c I/S2. Dr Income a/c I/S
Cr Prepaid income B/S3. Dr Prepaid income B/S
Cr Income a/c I/SThank you!
For income:
When you receive cash:
Dr Cash
Cr Income AccountAt the end of the year, if there is income to be accrued:
Dr Accrued Income
Cr Income AccountAt the start of the following year,
Dr Income Account
Cr Accrued incomeAt the end of the year, if there is income prepaid:
Dr Income Account
Cr Prepaid incomeAt the start of the following year:
Dr Prepaid income
Cr Income Account.Hallo,
Why the accrued income includes 3 steps, one with the Cash a/c and the prepaid income only 2 steps, without the Cash a/c, or it doesn’t matter and depends on how the accountant decides to do it?
Thank you!
Read what I wrote again!!! Accrued income and prepaid income have the same number of steps!!!!!
Obviously there is always an entry when cash is received. The accountant cannot decide not to enter cash received!
Then depending on whether it is prepaid income or accrued income there are then two more steps.
Hallo,
I asked because I had to make sure of the reason why you wrote only two entries in the prepaid income not showing the cash.
I understood the three entries for the accrued income, but didn’t know why you gave only two entries for the prepaid income.
Thank you!
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