The Sage Course Companion on Financial Accounting is an accessible introduction to the subject that will help readers to master key concepts and enhance their thinking skills in line with course requirements. It provides support on how to revise for exams and prepare for and write assessed pieces.

Accruals and Prepayments

Accruals and Prepayments

Accruals and prepayments

Accruals and prepayments lie at the heart of the double entry bookkeeping system and modern financial accounting. The accruals concept is often used to refer to both accruals (outstanding or unpaid expenses) and prepayments (payments in advance). You may remember that earlier in this part we discussed some of the accounting concepts and, in particular, we stressed the importance of the accruals concept where the accruals concept refers to the process of matching revenue and expenses of the same accounting period.

A business will prepare its accounts for a defined period of time, typically at least every year and accountants spend considerable time at the end of each financial year ensuring that the final accounts include only those amounts that relate ...

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