[tomide]

:confused:

[X-stream87]

A prepayment is when you pay for an expense in advance, meaning it hasent happened yet but you have paid for it and do not record it as an expense until the end of your fiscal period for example, rent and insurance are the two most common prepaid expenses, lets say you pay for a years rent in October to record it as a journal entry would look like this...

Prepaid Rent(asset account)... 12000(1000x12 months)
Cash... 12000

Now lets say your fiscal period ends in December to record the used up rent would look like this.

Rent Expense... 2000(12000*2/12)
Prepaid Rent... 2000

That is a Prepaid Expense.

Now for accruals. Bascially accruals are expenses or some cases revenue as that has incurred but has not been paid an example of this is salarys for employees for the year (because they get paid bi-weekly and one week of there pay period falls at the end of the fiscal year) and in some cases it is revenue, because in these cases you have been paid for a service that has yet to be done.

Lets say you are recording employee wages for one year it would look something like this.

Salaries Expense... 2000(made up figure)
Salaries Payable(liabilitie something you owe)... 2000

Now if you did accrued revenue it would look like this.

Cash(because they paid you alrdy)... 10000
Unearned Revenue(liabilitie because you own them something)... 10000

Now note that accrued revenue is not always adjusted at the end of a period and can happen at anytime.

Now this is all the advice I can give you and you probably won't understand it because I'm sure it seems a tad overwhelming so if you need additional help just ask and I will try to simplify what I can as best as possible.

Good Luck.

[Celia3]

Very clear to understand.