I am terriblely sorry for having to ask questions in Sunday morning, but I really can't go out to play if I don't understand these (This is sad... I know), anyway here they are:
1 - about reverse the opening accrual and prepayment
This is the area I always feel not sure about - all the text books mentions this but rarely I could find one with complete and clear explaination (at least this is how I feel), I've come up some ideas but not sure if I have understood it correctly: for instance, if there is an opening balance of "2109 Accrual CR £200 and 1103 Prepayments DR £1000", and the accrual contains 150 electric bill and 50 water bill from last financial year, and the prepayment is for my rent this coming month in this financial year, to reverse them, I entered:
Journal
2109 Accrual DR 200
7102 Water CR 50
7200 Electricity CR 150
1103 Prepayment CR 1000
7100 Rent DR 1000
then used the reversals to clear the Accruals and Prepayment balance.
-------have I done it correctly?----
2 - what does "Hire purchase" mean? I checked COA and seems it belongs to "long term liability", but what if a photographer hire a spot in a hotel for his photo shoot, does this bill belongs to "Hire purchase"? or Does it belongs to "Overhead", more specifically belongs to "Equipment Hire and rental"?? what would be the nominal code for this bill in Sage 50?
Hire Purchase is a type of finance, like a loan. It's classed as a long term liability because typically the agreement lasts for ,say, 3 years. Quite often Assets such as vans are bought on hp. So in year one you
Dr Assets Cr HP Agreements
Then over time the liability is reduced by the payments made against the agreement.
In the example you used, you're correct the "hire of a room" is something different and I would open a new nominal in 6000 range, but others may treat it as an overhead rather than a direct expense.
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
I think you are right for this to have "hire of a room" in the Direct Expense range. I checked my books and it basically says that direct expense is part of direct costs, which is "a cost that is directly attributable to the manufacture of a product (or provision of a service)". And "Overhead costs for a business are the cost of resources used by an organization just to maintain its existence". I have created a new code of 6901 for this bill.
Thank you Anna -------------------------- Would someone please confirm my answer for the first question??? I really hope I got it right.
I have got all different books, the defination I qouted above is comparably clear for my understanding, which I found on this link: http://skoola.com/lecturepage.php?id=1472&cid=2
And for more detail I would say ACCA F2 Management Accounting and look for the Cost range
I look for anything I can found to search for the answer.
Thank you so much Pauline, now I know how to the accrul and prepayments!! You know, I had been stucked here for 4 days by now, and I just couldn't get my head around, I really can't thank you enough!
!
), anyway here they are:
!! You know, I had been stucked here for 4 days by now, and I just couldn't get my head around, I really can't thank you enough
