Reversal of Acrruals and Prepayments

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Reversal of Accruals and Prepayments

Accruals and prepayments brought forward at the beginning of the year must be reversed.

Five steps are involved

  1. At the beginning of the year, reverse opening accrual or prepayment

  2. Double-entry: -

    1. Reversal of an accrual

    Dr Accruals (SOFP)
    Cr Expense (I/S)

    2. Reversal of a prepayment

    Dr Expense (I/S)
    Cr Prepayment (SOFP)

  3. Post the cash paid during the year

  4. Post any closing accrual or prepayment

  5. Balance off the expense and accruals/prepayments accounts

NotesQuizCBEMock