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

Show these transactions in the rental expense account. 

Prepaid expenditure increases profit on the statement of profit or loss and also 

creates a current asset to be included on the statement of financial position. 

For example, if we were to include a prepayment of $1,000 in our financial 

statements for insurance, the accounting entries would be: 

Dr Prepayments $1,000 

Cr Insurance expense $1,000 

The prepayments side would increase our current assets by the $1,000. The 

insurance expense would decrease by the $1,000, and hence increase our 

overall profits. 

 

 

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