Ask Me Help Desk

Ask Me Help Desk (https://www.askmehelpdesk.com/forum.php)
-   Accounting (https://www.askmehelpdesk.com/forumdisplay.php?f=19)
-   -   Partnerships in Business. Why is an accrual added to overall profit? (https://www.askmehelpdesk.com/showthread.php?t=710484)

  • Oct 20, 2012, 11:30 AM
    Gemma75
    Partnerships in Business. Why is an accrual added to overall profit?
    The business partnership has been prepaid rent of 7,000. As this is a possible expense due, it is considered an accrual and is entered into the Statement of Financial Position as an accrual. It is also entered into the Statement of Profit and Loss as an expense, which reduces the profit. My question is why is it added to the profit in the Statement of Adjusted Profit?
  • Oct 22, 2012, 02:23 PM
    paraclete
    a prepayment is a value to a subsequent accounting period, therefore when you make a prepayment you are removing expense from the current year. What you appear to be describing is the adjustment of a prepayment from a previous accounting period. In the ordinary course of preparing reports a prepayment would add to profits and an accrual would reduce profits. Perhaps you have your accounting terms mixed up

  • All times are GMT -7. The time now is 05:00 AM.