W7 - PREPYMT & ACCRUALS - ACCRUALS ACCRUALS...

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1 ACCRUALS & ACCRUALS & PREPAYMENT PREPAYMENT
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2 1. REVENUE  Accruals Prepaid 1. EXPENSES  Accruals  Prepaid
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3 THE NATURE OF ACCRUALS THE NATURE OF ACCRUALS     The accruals concept dictates that costs are recognized as they are incurred, not when money is paid. That is, goods and services are deemed to have been purchased on the date they are received. This gives rise to accruals/accrued expenses which are creditors in respect of services received that have not been paid for at the end of the accounting year. Accrued expenses arise where services are paid for in arrear; eg electricity, gas, telephone calls.
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4 THE COMPOSITION OF ACCRUALS THE COMPOSITION OF ACCRUALS     An accrual may comprise either or both of the following: 1. Invoices received (for expenses) that have not been paid at the end of the accounting year;   2. The value of services received for which an invoice has not been rendered at the end of the accounting year. The latter requires an estimate to be made of the
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This note was uploaded on 10/24/2011 for the course ACCOUNTING 101 taught by Professor Abraham during the Spring '11 term at Abraham Baldwin Agricultural College.

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W7 - PREPYMT & ACCRUALS - ACCRUALS ACCRUALS...

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