What are Accruals and Prepayments?

WHAT ARE ACCRUALS AND PREPAYMENTS?
Let’s go back to the accounting concepts. More specifically the accruals and matching concept whereby it states that the expenses and income recorded in the accounts should relate to the time period of those accounts. Therefore, when the amount paid or received for an expense or income does not match the amount incurred, then an adjustment must be made. This adjustment is better known as an accrual or prepayment! The aim of an accrual or prepayment is to match the expenses used in that period to the revenues raised in the period. Accruals and prepayments play an important role to make sure that the financial records show a true and accurate reflection of an organisations activities. The main principle for treating accruals and prepayments in the profit and loss are that accruals you add and for prepayments you deduct. So, accruals add, prepayments deduct. And in the balance sheet an accrual is treated as a current liability and a prepayment is treated as a current asset.

This video will help you with questions such as what is an example of accrual and prepayment, what is an example of an accrual, what is an example of a prepayment, what is the difference between prepayments and accrued expenses, easy way to remember accruals and prepayments, what are accruals and prepayments, what are accruals and prepayments in accounting, what are accruals and prepayments examples, accruals and prepayments worked examples, accruals and prepayments journal entries, accruals and prepayments t accounts.

MUSIC CREDIT
@benfrydrums

DISCLAIMER
Our content is to be used as an EDUCATIONAL TOOL that aims to provide a foundation for individuals to learn financial accounting, management accounting and bookkeeping topics as practiced in the United Kingdom. As a result, not all complexities are shown or provided. Examples may include but are not limited to; differences between financial reporting, accounting standards or tax treatments. We are NOT ENGAGED in the providing of accounting, bookkeeping, financial, investment, tax, or other professional services. You should consult with a qualified or professional such as an accountant, business advisor, investment specialist, lawyer, solicitor, etc., with regards to specific facts and situations.

#accrual #prepayment #accrualsandprepayments

[_pelicans]

Good video but your examples are much easier the other way around, at least in my country, electricity is a accrual, as you use it then are billed and rent is paid in advance then you use it.

[kirushigawisnavi]

superb videos!!
please upload more :)

[talazaroug]

thank you for the great videos but please remove the music its very loud and makes it hard to focus on the content.