ACCURAL/DEFFARLS:

ACCURELS :

1. Accrued Expenses

Accrued Expenses: Expenses incurred but not yet paid or recorded at the statement date are called
accrued expenses.

Ex: Interest incurred but not paid

Rent incurred but not yet paid

Salary incurred but not yet paid

Commission incurred but not yet paid

Salary Salary A/C Dr

To Salary Payable Account
Next Month Salary payable A/C Dr
To Bank Account
Rent Rent A/C Dr
To Rent Payable Account
Next Month Rent payable Account
To Bank Account
 Commission Commission Account Dr
To Commission payable
Interest Interest A/C Dr
To Interest Payable A/C

SAP Process:

If Accrued expenses posted with purchase order:

Without GR and with only IR

Rent payable

IR Rent A/C Dr
To Rent Payable to Vendor A/C
Rent Payable to Vendor A/C Dr
To Bank Account

Commission Payable :

IR Commission A/C Dr
To Commission payable to Vendor A/C
Commission payable to Vendor A/C Dr
To Bank Account

Accrued Revenues :
Revenues for services performed but not yet recorded nor collected

Service revenue

Month end entry Revenue Receivable A/C Dr

To Revenue Account
Bank Account Dr
To Revenue Receivable A/C
PREPAID :

Prepaid Expenses :

When companies record payments of expenses that will benefit more than one
accounting period, they record an asset called prepaid expenses or prepayments

Examples :

1. Insurance
2. Rent
3. Advertising
4. Salary

Accounting Entry :

Insurance Prepaid insurance A/C Dr

TO Bank Account
Every Month Insurance A/C Dr
To Prepaid insurance
Rent Prepaid Rent A/C Dr
To Bank Account
Rent A/C Dr
To Prepaid Rent

.SAP PROCESS:

PO without GR and with IR

Prepaid Rent A/C Dr

To Vendor Account
Vendor A/C Dr
To Bank Account
Rent A/C Dr
To Prepaid Rent A/C
 Prepaid income :
When companies receive cash before services are performed

Ex:

1. Advance salary received

2. Advance Rent received

Advance Salary
Bank Account Dr
To Advance Salary Account
Advance Salary Account Dr
To Salary Account