Meaning of Pre- Payments And Accruals & Distinctions Between Pre-Payment And Accruals - SS1 Accounting Past Questions and Answers - page 1
What are pre-payments?
Payments made by a business in advance for goods or services that will be received or consumed in the future
Payments made by a business after goods or services have been received or consumed
Payments made by a business for goods or services that are not required
Payments made by a business for goods or services that have not been received or consumed
What are accruals?
Expenses that a business has incurred but has not yet paid for or revenue that a business has earned but has not yet received payment for
Expenses that a business has paid for in advance or revenue that a business has received in advance
Expenses that a business has incurred but has not yet paid for or revenue that a business has earned but has already received payment for
Expenses that a business has not yet incurred or revenue that a business has not yet earned
How are pre-payments recorded on the balance sheet?
As liabilities
As assets
As expenses
As revenues
How are accruals recorded on the balance sheet?
As liabilities
As assets
As expenses
As revenues
What is the main distinction between pre-payments and accruals?
Pre-payments involve payments made in advance for goods or services that have been received, while accruals involve expenses or revenue that have not yet been paid for or received
Pre-payments involve payments made in advance for goods or services that will be received or consumed in the future, while accruals involve expenses or revenue that have been incurred or earned but have not yet been paid for or received
Pre-payments are recorded as liabilities on the balance sheet, while accruals are recorded as assets
Pre-payments are expenses, while accruals are revenues
Define pre-payments and accruals in simple terms.
What is the main distinction between pre-payments and accruals?