ACCRUALS are revenues earned or expenses incurred which impact a company's net income on the income statement, although cash related to the transaction has not yet changed hands.
Ito 'yung gastos na hindi pa nabayaran at kita na hindi pa nasingil.
Ang common example ng accrued expense is the utility bills like electricity, telephone at water.
If Meralco Co., issued a billing on February 10,2020 for January power consumption amounting to 5,000.00, the entry would be as follow:
Power.......... 5,000.00
Accrued Expense.......... 5,000.00
If on February 12, the billing was made. The entry would be:
Accrued Expense..... 5,000.00
Cash.............................5,000.00
By the way, Accrued Expense is a LIABILITY account. Agree ba kayo sa akin? Wala kayong choice kundi maniwala.
Prepayments are amounts paid for by a business in advance of the goods or services being received later on. Any payment made in advance can be considered a prepayment. A prepayment is not dissimilar to a deposit, but generally falls under a more set time period for fulfillment of the goods or service purchased.
Ito naman is advance payment ng isang Company. Ang common example naman nito is the rent expense.
For example, ABC Company paid the whole year rent amounting to 60,000. on February 1, 2020. The payment coverage is January 1, 2020 to December 31, 2020.
The entry would be as follow:
Rent Expense......... 5,000.00
Prepaid Rent.........55,000.00
Cash................. 60,000.00
If 60,00 for twelve months, divide 60,000.00 to 12 kaya lumalabas, 5,000 per month. And since February na nagbayad, Ang January rent is already consumed kaya expense na ito. While the rest is still prepaid.
By the way, PREPAYMENT is an ASSET account.
On February 29, 2020, the entry would be as follow:
Rent Expense............ 5,000.00
Prepaid Rent..............5,000.00
Since at the end of February, another month is consumed again. Kaya mababawasan ang prepayment and madadagdagan ang expense.
Same is through on the next month hanngang maubos ang prepayments.
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Introdution to Accounting
RandomCalling the attention of all aspirant soon to be CPA'S and any other related courses to stop by and read this book. This is a taglish book for better understanding of explanations. Read in order to learn. Listen in order to understand. So what ar...
