Hi can anyone help ????????? Ive always posted my accruals and prepayments as a debit or a credit then opposite to balance off.
My predecessor created journals with credits and debits on the same jornal, this gives a different balance, can this be done? This has now confused me surely the prepayment is either a debit or a credit.
Say you have in invoice that you post for £120 for insurance for the next 12 months. Obviously you have to allocate this over the next twelve months to charge £10 each month to the P&L. Journals to record as follows
Month 1
Dr Insurance £120
Cr Bank/Creditors £120
Dr Prepayments £110
Cr Insurance £110
Month 2
Dr Insurance £110
Cr Prepayments £110
Dr Prepayments £100
Cr Insurance £100
Month 3
Dr Insurance £100
Cr Prepayments £100
Dr Prepayments £90
Cr Insurance £90
and so on so that £10 per month is allocated to each month in the profit and loss.
