Accounting (AS)·Adjustments · NSSCAS 2.1.1
Accruals & prepayments: the ledger accounts
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A business does not always pay or receive money in the same year it uses or earns it — and the examiners know it. In this lesson you learn the four adjustments (accrued expenses, prepaid expenses, accrued income and income received in advance) and, most importantly, how to prepare the ledger accounts for them, complete with balances brought down from last year. Paper 1 asks for exactly these accounts almost every year, so master the layout here and the marks are yours.
What you'll learn in this lesson
By the end you should be able to (NSSCAS Accounting (AS) 2.1.1):
- explain the need for the following adjustments: accrued income, income received in advance, accrued expenses, prepaid expenses
- explain accrued expenses and income, prepaid expenses and income received in advance
- prepare income and expense accounts in the general ledger for the adjustments above, including the balances brought down from the previous financial year
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