A basic test on accruals:  You are working on the accounting records of a business for the year ended 31 March 20X7. You are looking at the rent expense for the year and this includes payments for the following periods: Apr 20X6 – May 20X7- Office 1 £5,040 Apr 20X6 – Jan 20X7- Office 2 … Read More

  Prepaid income is an amount received in advance for a sundry income which relates to an accounting period after the year end. In accounting for prepaid income, the effect that needs to occur will be to reduce the overpayment in income in an attempt to account for only the income earned in that accounting … Read More

Accrued income is a sundry income amount outstanding and yet to be received by the end of an accounting period, so has not been entered into the ledger accounts. In accounting for accrued income, the effect that needs to occur will be to increase the relevant income in an attempt to account for the total … Read More

  A prepayment is an amount paid in advance for an expense which relates to an accounting period after the year end. In accounting for prepayments, the effect that needs to occur will be to reduce the relevant expenditure in an attempt to account for the transactions which have been overpaid and then to increase … Read More