Acca financial Accounting (FA) Study Text ac ca (FA)

Accruals and prepayments 

176

 

KAPLAN PUBLISHING

 

 

3 Accrued 

expenditure 

 

 

An accrual arises where expenses of the business, relating to the year, 

have not been paid by the year end. This will reduce profit for the year. 

In this case, it is necessary to record the extra expense relevant to the year and 

create a corresponding statement of financial position liability (called an 

accrual): 

Dr Expense account 

$X 

Cr Accrual 

$X 

 

 

Illustration 1 – Accrued expenditure 

 

A business’ electricity charges amount to $12,000 pa. In the year to 

31 December 20X5, $9,000 has been paid. The electricity for the final 

quarter is paid in January 20X6.