{m}.{s}.1The accruals or matching concept tells us that revenues and expenses are to be brought into the profit and loss account for the period in which they are incurred.
- Expenses are accrued when they have been incurred but not yet billed.
- The expense accounts must be debited to increase the expense.
- The Accruals account is credited to record the liability.
Expense 1 |
Bal | xx | | |
Accrual | xx | | |
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Expense 2 |
Bal | xx | | |
Accrual | xx | | |
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[
{m}.{s}a]
{m}.{s}.2
- Where expenses recorded in part relate to the following year, they must be reduced by a prepayment adjustment.
- The expense accounts must be credited to reduce the expense.
- The Prepayments account is debited to record the asset.
{m}.{s}.3Income can also be accrued:
- Credit Income to increase the balance.
- Debit Sundry debtors to record the asset.
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Sundry debtors |
Accrued Income | xx | | |
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[
{m}.{s}c]