CIMA BA3 Syllabus C. PREPARATION OF ACCOUNTS FOR SINGLE ENTITIES - Reversal of Accruals and Prepayments - Notes ^{3 / 20}

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