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Prepaids and accruals relate to the services and goods a company receives from its vendors for which payment has been or will be made. Prepaid expenses are the advance payments for goods and services that are to be used up in the future and are classified as an asset on the balance sheet, while expense accruals are liabilities, amounts that have been incurred but have not been paid by a period's end.
Accrued expenses are those which are yet to be paid but the benefit associated to them is acquired already.
we treat them as liability which has to be paid.
Prepaid expenses are those which are paid in advance but the benefit associated to them is not acquired yet. we treat them as assets.
Accrued Expenses : Expenses that have accrued but not yet paid or recorded
1- it's recoed as current liablites
2- Example ( Wages - rent - electrical payable -Interest )
DR wages Expenses
CR Wages Payable
Prepaid Expense : Expenses amount paid in cash before the benefit received .
1-it's record as current assets
2- Example ( prepaid Insurance - Advertising -Supplies )
DR Prepaid
Cr Cash
