FINAL ACCOUNTS – ACCRUALS AND PREPAYMENTS

FINANCIAL ACCOUNTING SSS2 FIRST TERM        

WEEK 4 &5

FINAL ACCOUNTS – ACCRUALS AND PREPAYMENTS

Contents

ACCRUALS

The accrual concept states that revenue and expenditure of a period should be matched together – whether or not such revenue or expenditure had actually been received or paid for.

This means that items of expenditure or income shown in the final account should be for sums actually related to the period covered by the financial statements prepared in the final account.  Therefore statements such as the Trading and Profit and Loss Account should be prepared on the accruals, or matching basis so that expenses are matched to the revenue earned: that is, expenses are shown in the Profit and Loss Account as they…