Accruals Truths (ACCA FA)

Exercise and reference answers

Questions

1. Statement is true

   Yes

   Statement

   Income is recognised when earned, not when cash is received.

2. Statement is true

   Yes

   Statement

   A prepayment is a current asset at the year end.

3. Statement is true

   Yes

   Statement

   An accrued expense increases liabilities.

4. Statement is true

   No

   Statement

   Accrued income is shown as a liability.

5. Statement is true

   Yes

   Statement

   Prepaid rent reduces this year's rent expense.

Instructions

True if the accruals-concept statement is correct.