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Prepayments and accruals

You can record an expense on the ledger and apportion it across several financial periods, rather than distort figures for the period in which it is paid. This will give a true and fair account of your profits.

Expenses can be accounted for in advance to cover costs such as rent or insurance and are referred to as prepaymentsThe process of deferring expenditure and income to the accounting period in which it is incurred. This usually involves setting up an asset on the Balance Sheet for bills paid in advance, and then releasing that asset by instalments to the accounting periods in which the service is actually provided.. You can anticipate expenses such as gas or heating expenses that are usually paid in arrears, and are referred to as accrued expenses.

These expenses are dealt with using the Prepayments or Accruals routines that are essentially journalA record that holds one or more transactions for posting. Synonymous with batch in batch processing. entry routines. However, unlike the Journal Entry routines explained earlier in this section, it is not possible to hold, amend or delete these journals.

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