I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

assets, as they represent money that has been paid out in advance of the expense being incurred.  

 Accruals 

are included in current liabilities, as they represent liabilities which have been incurred 

but for which no invoice has yet been received. 

Transaction 

DR 

CR 

Description 

Accrual 

Expense 

Liability 

Expense incurred in period, not recorded 

Prepayment 

Asset 

(Reduction in) expense 

Expense recorded in period, not incurred 

until next period 

1.5.1 Reversing accruals and prepayments in subsequent periods 

In each of the above examples, as with all prepayments and accruals, the double entry will be reversed 

in the following period, otherwise the organisation will charge itself twice for the same expense 

(accruals) or will never charge itself (prepayments). It may help to see the accounts in question.