ACCRUALS A

ND

PREPA

YMENTS

GOLDEN RULE

We only include items of expense and revenue that apply to the accounting period when preparing the trading profit and loss account

Accounting period = the time frame associated with the account being prepared

ACCRUALS (DUE)

An amount due to be paid by the company e.g. Light and Heat

• Amount due at the end of the period Add to the relevant item Show as a current asset (revenue due) Show as a current liability (expenditure due)

• Amount due at the start of the period• Minus from the relevant item

PREPAYMENTS (PREPAID)

An amount of money paid in advance

• Prepayment at the end of the period• Minus from the relevant item• Show as a current asset (expenditure prepaid)• Show as a current liability (revenue prepaid)

• Prepayment at the start of the period• Add to the relevant item