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Does an invoice/transaction have to be physically paid to qualify as a prepayment? I don’t think so as we are ensuring that the SOPL & SOFP are reflective of transactions regardless of when cash is paid/received but a friend believes that creditors and debtors would be overstated?
A prepayment is when you have paid something in advance – so you have to have made a payment!!
I do suggest that you watch my free lectures. They are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Thanks John I will watch the lectures. If it’s not prepaid as it’s not paid prior to the year end but relates to the next year what’s the accounting treatment for the creditor?
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