Year-end adjustments: accrued and prepaid expenses, and irrecoverable debts and provisions.
Under the accruals (matching) concept, expenses and income are recorded when incurred/earned, not when paid/received.
Accruals and prepayments
Accrued expense — owed but not yet paid (e.g. unpaid electricity): add to the expense; show as a current liability.
Prepaid expense — paid in advance (e.g. rent for next period): deduct from the expense; show as a current asset.
The same logic applies to income owed/received in advance.
Viewing only
This content is free to read on superexams.com and cannot be printed or downloaded.
Read the full note, free
Create a free account to read this note in full. Every free account gets 2 complete revision notes, no card needed.