Accrual Accounting

[missscotia]

Hi,

Wondering if someone could help? I was looking on some info about accrual accounting. I am doing a question on my course at the moment and it wants me to use the accrual accounting method but i have never done this before so don't know what kind of entries to do?

I think I got the prepayment sorted out but what kind of entries do I do for example for invoices i have received and not paid the same month and invoices I have sent out and not received payment for the same month? Do i put these through as accruals? I am doing this through Sage Instant aswell so I don't know what kind of journals to put through for month end.

Any help is greatful!!

Thanks

 

[dp0848]

Invoice sent out but not yet paid by the customer are debtors.

Invoices received but not yet paid are creditors.

 

[missscotia]

yeah I know is but do I need to do journals for the accrual at end of motnh as i have invoiced but have received no money from supplier. Do i need to do a accrual/bank journal and vice versa for an invoice i have received and not paid by the end of the month?

 

[Zeno]

yeah I know is but do I need to do journals for the accrual at end of motnh as i have invoiced but have received no money from supplier. Do i need to do a accrual/bank journal and vice versa for an invoice i have received and not paid by the end of the month?

No, it will be shown as a trade debtor or a trade creditor in the appropriate ledger (assuming you have posted all the invoices).

 

[missscotia]

I have posted all invoices I have put out and all that i have received.

Sorry for being a bit think but the course paperwork has nothing about this and i been struggling with that to do

 

[Zeno]

You make an accrual for an item that you have consumed but not received the invoice for - heat & light, accountancy fees being the usual suspects.

 

[missscotia]

So if i had an entry on my course question the said "paid for computer/office furniture/office cleaning/office stationery by cheque number xxxxx, amount £xx.xx" would i accrue them if i had no invoice.

 

[Zeno]

It would depend on the date the cheque was written. Are you sure you are not overthinking this?

 

[missscotia]

the dates were in Jan and i need to do a month end for january.

I am thinking i am overthinking but want to make sure

 

[elaine@cheapaccounting]

get Frank Wood's book on accounts - that will help you

 

[missscotia]

I have got frank Wood's business accounting 1 but can't find anything definitive.

 

[Alison Jones]

Business Accounts for bookkeeping and financial accounting by David Cox ISBN 9781872962634 is a good book. I got recommended this by the tutors at an ICB revision course. I find it more easier to understand then the information in the coursework lessons I got sent by the correspondent college I registered with.

Alison

 

[Alison Jones]

I have got frank Wood's business accounting 1 but can't find anything definitive.

What course are you doing?

Alison

 

[missscotia]

Sage Computerised Accounting. Everything else i have picked up no bother and this is just not getting into my head!

 

[Mattonella Tile Studio]

From a simpleton view point (that refers to me not you by the way), I just think of accruals/prepayments as something that is needed to make sure that everything is in the accounts.

I've invoiced a customer today that they haven't paid yet, and I've got some invoices on my desk that need paying. The invoices are in Sage so all is good. My creditors shows me that all of the money in the bank isn't mine as I have some to pay out.

However, I'm burning electricity by being here, but I won't be billed for that until the end of the month. But if I shut up shop now I'd still have to pay that bill, i.e. I've used the electricity up, and I will be invoiced for it. As it doesn't show on Sage anywhere, as I haven't had an invoice to enter, then I need to enter that as an accrual just to make the company accounts more accurate.

Likewise, I've paid the rent 3 months in advance, but say I've only used 1 month. The rent account will show £3000 going out (assuming 1k a month), but really I'm only 1k through the rent, so it would be more accurate to put that 2k back into the company to show the health of it in the form of a prepayment.

Hope that rambling is of some help.

 

[missscotia]

mattonella - Thankyou that what i wanted to hear, thanks for that!!

Alison - looking on ebay for that book now

 

[Jenni384]

Mattonella - excellent explanation!

 

[accountancyextra]

get Frank Wood's book on accounts - that will help you

Brings back memories. The best accounts book ever written IMO