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Accruals: Accruals are those items the benefits of which has already taken by company but the payments are not yet paid or services of which are already provided but amounts are not received yet
Example: rent accrued for previous 6 months but not yet paid.
Pre payments: Pre payments are reverse of accruals as these are the payments which have made already but the benefits of those payments are not yet taken by the company.
For Example: Prepaid rent for next 6 months.
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Accounting concepts where adjustments for prepayments and accruals are based?
Matching principle. Go SPC.
Are prepayments nonmonetary assets?
Yes. You will receive / provide no cash or cash-equivalents. You will get / provide some assets for the prepayments.
How to place prepayments on balance sheet?
prepayments are part of asset side of balance sheet and shown as current or other assets in balance sheet.
Assets prepayments become revenues when they expire?
true
Does increase in accruals increase or decrease cash flow?
An increase(+) in accruals increases(+) the cash provided by operating activities under the cash flow statement.
Accounting concepts where adjustments for prepayments and accruals are based?
Matching principle. Go SPC.
Are prepayments nonmonetary assets?
Yes. You will receive / provide no cash or cash-equivalents. You will get / provide some assets for the prepayments.
How to place prepayments on balance sheet?
prepayments are part of asset side of balance sheet and shown as current or other assets in balance sheet.
Assets prepayments become revenues when they expire?
true
What are prepayments?
Prepayments are payments that are done for goods and services which a company/organization expect to receive or consume in future periods. Known again as prior payments the amounts payed in advance can be for rent, software license etc. Prepayments goods and services are recognized as assets once they have been received. -- Regards Quew Kgomari
What is the correct sequence of the accounting cycle?
This is the formal sequence of steps in the accounting cycle:journalisation i.e. recording transactions into the general journalposting these transactions to the general ledgers.summarise these transactions into the trial balancepass adjusting entries (bad debts, accruals and prepayments and depreciation)prepare adjusted trial balancemake income statement (statement of comprehensive income)write balance sheet (statement of financial position)
Does increase in accruals increase or decrease cash flow?
An increase(+) in accruals increases(+) the cash provided by operating activities under the cash flow statement.
How do you calculate cash accruals?
PAT + depreciation for the year
Where are accruals put on the balance sheet?
Current liabilities.
How do accruals and deferrals relate to the matching concept?
balance sheet
When to use accounting accruals?
In accrual based accounting, expenses are recognized in the period in which they are incurred if measurable.
What is the difference between gross and net dscr?
Gross DSCR= Cash accruals ( Profit after tax + Depreciation) + Interest ----------------------------------------------------------- Installments of loan + Interest Net DSCR = Cash Accruals (PAT + Depreciation) -------------------------------------- Installments
