Chapter 9
Accruals and Prepayments
accruals (CF dồn tích/nợ dồn tích) ≠
accrual basis (nguyên tắc dồn tích)
Accruals &
Prepayments
Expense Income
- Timeline - T account
technique technique
1 The principle behind accruals and prepayments
• The principle requires that expenses should be matched against income in the
period to which they generate.
• Accruals (accrued expenses/accrued liability): Expenses which are charged
against the profit for a particular period, even though they have not yet been
paid for or the invoices have not yet been received (là những chi phí thực tế đã
phát sinh nhưng chưa được thanh toán.)
eg. accrued wages payable, accrued sales tax payable, accrued rent payable, etc.
• Prepayments (prepaid expenses): Expenses which have been paid in one
reporting period but are not charged against profit until a later period, because
they relate to that later period. (chi phí thực tế đã phát sinh nhưng có liên quan
đến kết quả hoạt động sản xuất kinh doanh của nhiều kỳ kế toán. Khoản chi phí
này được kế toán kết chuyển hợp lý vào chi phí sản xuất kinh doanh của các kỳ kế
toán sau).
2 Accruals
• Booking entry for accruals Liablities
Dr Expense (SoPL)
Cr Accruals (liability on SoFP)
• End of the period adjustment
Dr Expense
Cr Accrual
• Next period reversing (bút toán đảo ngược)
Dr Accrual
Cr Expense
• Cash paid
Dr Expense
Cr Cash
2 Accruals
Hasab Motor Spares prepares its accounts to 28 February each year. Hasab Motor Spare’s telephone
contract commenced (bắt đầu) 1 April 20X6 and the quarterly telephone bill is received at the end of each
quarter.
Requirement
Calculate Hasab Motor Spare’s telephone expense to be charged to the statement of profit or loss for the
year ended 28 February 20X7.
Telephone expense for the three months ended:
All1/3/X6
the bills1/4/X6
were paid on the final day of each three-month
30/6/X6 period.
30/9/X6 31/12/X6 28/2/X7 31/3
23.5 27.2 33.40 36.00
23.4 + 27.2 + 33.4 + 36 x = 108.10
2 Accruals
A company pays rent quarterly in arrears (pay late: nợ khất lại) on 1 Jan, 1 Apr, 1 Jul, 1 Oct each year. The
rent was increased from £ 90.000 per year to 120.000 from 1 Oct . What rent expense and accrual
shoule be for the year ended 31 Jan, 20X3?
1/2/X2 1/10/X2 1/1/X3 31/1/X3
Total rent expense = Rent expense (1/2/X2 – 30/9/X2) + Rent expense (1/10/X2 – 31/1/X3)
= 8 + x 4 = 100,000
Accrual (1 month from 1/1/X3 to 31/1/X3) = = 10,000
At 31/1/X3 adjustment
Dr Rent expense 10,000 belong to P&L
Cr Accrual 10,000 (liability SoFP)
At 1/2/X3, reversing accrual
Dr Accrual 10,000
Cr Rent expense 10,000
At 1/4/X3, pay rent for Jan, Feb, Mar
Dr Rent expense 30,000
3 Prepayments (prepaid expense)
• Booking entry for prepayments Current Asset
Dr Prepayments (asset in SoFP)
Cr Expense (SoPL)
• At the day we paid cash (during the period)
Dr Expense 12,000 (full amout book to expense)
Cr Cash 12,000
• End of the period adjustment
Dr Prepayment 3,000
Cr Expense 3,000
• Next day (next period) reversing (automatic)
Dr Expense 3,000
Cr Prepayment 3,000
3 Prepayments
A business opens on 1 January 20X4. It pays a fee for its adverts to be a ‘promoted post’ on search
engines at a cost of£20,000 per year, payable quarterly in advance at the beginning of each three-
month period. Payments were made as follows:
Requirement
What is the advertising expense for the year ended 31 December 20X4?
1/1/X4 31/3 30/6 30/9 31/12/X4
Paid in the year 25,000
Dr Advertising 25,000 (SoPL)
Cr Cash 25,000
The double entry for this prepayment is:
Dr Prepayments (Current asset) 5,000 (SoFP)
3 Prepayments
A company pays rent quarterly in advance on 1 Jan, 1 Apr, 1 Jul, 1 Oct each year. The annual rent
was increased from £60,000 per year to £72,000 from 1 Oct. Rent expense and prepayment for the
year ended 31 July 20X4?
1/8/X3 1/10 1/7/X4 31/7/X4
Total rent expense = 2 + x 10 = 70,000
Prepayment (2 month from 1/7/X4 to 31/7/X4) = x 2= 12,000
At 1/7/X4, pay in advance
Dr Rent expense 18,000 belong to P&L
Cr Cash 18,000 (liability SoFP)
At 31/7/X4, end of the year
Dr Prepayment 12,000
Cr Rent expense 12,000
At 1/8/X4 reverse entry
Dr Rent expense 12,000
Cr Prepayment 12,000
4 The accrual principle and income
• Accrued income arises when receipt of income (such as rent or subscription: an amount of money that you
pay regularly to receive a product or service) is in arrears at the end of the reporting period.
• Deferred income arises when income has been received in advance at the end of the reporting period, so it
needs to be carried forward and treated as income of the following reporting period.
• Accounting for deferred income liability:
• During period, receiced cash in advance:
Dr Cash
Cr Sale/Income
• End of period adjustment
Dr Sale/Income
Cr Deferred income (DT nhận trước)
• New period reversing
Dr Deferred income
Cr Trade receivable
Complete service:
Dr Trade receivable
Cr Sale/Income
4 The accrual principle and income
• Accounting for accrued income asset:
End of period adjustment
Dr Accrued income (asset)
Cr Revenue/Other income (SoPL)
• New period reversing
Dr Trade receivable
Cr Accrual Income
• Received cash
Dr Cash
Cr Trade receivable
5 Accruals, prepayments, advances and arrears and the trial balance
6 dạng bài tập
Dạng 1: The buyer actual expense (P&L) = ?
prepay/accrual (FP) = ?
Dạng 2: Bookkeeping
- CK (Adjustment)
- ĐK (Reversing)
Correct error?
Expense payable
Dạng 3: Combine Debit Credit
- Pay in advance/in arrear opening advance opening arrear (opening accrual)
- Closing/opening Cash paid Actual expense
closing arrear closing advance
(closing accrual)
5 Accruals, prepayments, advances and arrears and the trial balance
6 dạng bài tập
Dạng 4: The seller actual income (P&L) = ?
deferred/accrual income (FP) = ?
Dạng 5: Bookkeeping
- CK (Adjustment)
- ĐK (Reversing)
Correct error?
Income receivable
Dạng 6: Combine Debit Credit
- Receive cash in advance/in arrear opening arrear opening advance
- Closing/opening actual income cash received
closing advance closing arrear
