Prepayments and Accruals

Abstract

We have now covered the whole process involved in keeping a set of financial accounts — from opening a ledger and keeping track of transactions there and in the journals to preparing the final accounts at the end of the period. In the remaining chapters we will consider the reasons why certain adjustments have to be made to the information recorded in our books. We will also see how these adjustments can be made. In addition we will take the opportunity of giving you some additional practice preparing the final accounts. This chapter will cover the adjustments which arise because payments and receipts of money do not always occur in the financial period to which the expenditure or income relates.