CH 6 Cost of Sales, Accruals, and Prepayments

Is delivery inwards a part of the Cost of Sales?

Yes, it is added to it.

Is delivery outwards a part of Cost of Sales?

No, it is noted down as an expense.

What is an accrual?

An expense incurred during the year, but not paid for by year end.

What is the journal entry for an accrual?

Dr Expense Cr Accrual

What is a prepayment?

When an expense relating to the next financial year is paid for in advance.

What is the journal entry for prepayments?

Dr Prepayment Cr Expense

In what financial statement do accruals and prepayments go?

The SFP. Accruals in the Current Liabilities section and Prepayments in the Current Assets section.

What journal entry is needed to reverse an opening accrual?

Dr Accruals Cr Expenses

What journal entry is needed to reverse an opening prepayment?

Dr Expense Cr Prepayment

What is deferred income?

Income received in advance which relates to next year.

What is the journal entry for deferred income?

Dr Income Cr Deferred Income

What is accrued income?

Income earned during the period but not yet received.

What is the journal entry for accrued income?

Dr Accrued Income Cr Income

In what financial statement do deferred and accrued income go?

The SFP. Deferred Income is a Current Liability and Accrued Income is a Current Asset.

What journal entry is needed to reverse opening accrued income?

Dr Income Cr Accrued Income

What journal entry is needed to reverse opening deferred income?

Dr Deferred Income Cr Income