ADJUSTING for ACCRUALS and PREPAYMENTS

This is from a youtube website that was in chinese, so I decided to type it out as it is very helpful. If you speak chinese the link is: LCCI Level 1 - Ch 16 Adjusting for Accruals and Prepayments and Ch23 Year end Adjustments 1 - YouTube 

I hope this helps **

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  • Created by: Fuzzier
  • Created on: 06-02-12 19:16

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ADJUSTING FOR ACCRUALS AND PREPAYMENTS & YEAR REND ADJUSTMENTS

CASH ACCOUNTING vs. ACCRUAL ACCOUNTING

Net profit measured under these two methods of accounting would be very different
One of the main differences between cash accounting lies in the treatment of accruals and
prepayments of expenses and revenues

ACCRUALS

Accruals refer…

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The water charges paid on 19 January 2010 would be entered in the account in 2010.

USING CASH ACCOUNTING

The water charges account would be closed off at the end of 2009 as follows:




And the water expenses shown in the income statement for the year ended 31 December 2009…

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