Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 45 - No. 21)
What is the main difference in accounting for accrued and prepaid expenses?
Accrued expenses are recorded when paid, and prepaid expenses are recorded when incurred.
Accrued expenses increase liabilities, and prepaid expenses increase assets.
Accrued expenses decrease assets, and prepaid expenses decrease liabilities.
They are accounted for exactly the same way.
Explanation
Accrued expenses represent liabilities that the company owes, and prepaid expenses represent assets that it owns.
Comments (0)
