Question on: SS1 Accounting - Meaning of Pre- Payments And Accruals & Distinctions Between Pre-Payment And Accruals
What is the main distinction between pre-payments and accruals?
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A
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
B
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
C
Pre-payments are recorded as liabilities on the balance sheet, while accruals are recorded as assets
D
Pre-payments are expenses, while accruals are revenues
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Correct Option: B
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