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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Prepayments and accruals
Hello sir, thank you very much for your lectures. I am a little bit confused with this chapter. Why do we correlate the transactions with the payments. Maybe we receive the invoice but we don’t pay it.
For a prepayment for example, e.g. insurance we receive the invoice at the start of the interval of the insurance. Why don’t we Dr insurance and Cr payables the whole amount of the invoice? After that we can move the balance from payables to the prepayment account and record the payment(s) when they occur in payables account. The same with accruals. Thank you very much for your help again.