What is accrual and prepayment and example and accounting treatment Provisions and reserve

Question

Accepted Answer

Accrual is recognizing revenue or expenses when earned or incurred, regardless of payment. Prepayment is paying for expenses before they are incurred.

Accrual: revenue or expenses recognized when earned or incurred, regardless of payment
Example: recognizing revenue for services provided but not yet invoiced
Accounting treatment: record as accounts receivable or accounts payable
Prepayment: paying for expenses before they are incurred
Example: paying rent in advance
Accounting treatment: record as prepaid expense
Provisions: estimated liabilities for future events
Example: estimated warranty costs
Accounting treatment: record as expense and liability
Reserves: appropriations of retained earnings for specific purposes
Example: reserve for contingencies
Accounting treatment: record as liability

What is accrual and prepayment and example and accounting treatment Provisions and reserve

Popular interview questions of Management Accountant

Top HR questions asked in IMS Decimal Management Accountant