Accrual

Prepaid is in the business accounting is a step in the final period (usually the financial statements), with the values ​​in the profit and loss account and the balance sheet of the correct accounting period (eg, fiscal year, quarter) to be assigned.

Purpose and legal requirements

A distinction is necessary in order to determine a company's success even on an accrual basis, when transactions require multiple bookings and relate these different accounting periods. This is, for example, regularly the case when with a customer or supplier payment terms have been agreed, so if the delivery and performance (and thus the time of transfer of risk ) on the one hand and the payment on the other hand does not take place the same period. Prepaid also ensures that taxes for the respective periods can be dissipated correctly.

Prepaid is therefore the accounting definition of income and expenses of an accounting period, the corresponding will be made ( counter-) benefits in a later period. Prepaid expenses represent a kind of obligation or requirement dar.

Examples:

We have already paid for the service is provided in a later period - or vice versa: We have already received (An ) payment of a customer, provide the performance but only in a later period ( = transient prepaid ).

We have received a performance, but the demand of the supplier paid until a later period, and we receive payment for an already service we provide in a later period ( = anticipatory prepaid ).

Unlike provisions is in Deferred always known the exact amount, it is neither appreciated nor calculated. The legal basis for Germany in § 250 and § 252 HGB and for Austria in § 198 para 5.6 UGB regulated.

" Expenses and income of the financial year are to be considered independent of the times of the corresponding payments in the financial statements."

Prepaid

Prepaid expenses (abbreviation: ARA; ' items of the ARA ' accordingly: ARAP ) is a performance requirement. It occurs when an expense of the new year is an issue already in the old year.

Mnemonic: output now, effort later = Prepaid Expenses

When done, for example, in December, a prepayment for the January rent, is posted as follows:

1 of invoice receipt (in this case: The " Dauermietrechnung " )

2 In the Payment

4 in January ( the expense is posted to the correct period, ARAP is dissolved )

Accruals

Income of the new year that are already revenue in the old year, for example, advance payments from customers, on account of deferred income (abbreviation: PRA) booked. They justify payables, so the customers or other creditors of services the company claims. The booking on the revenue and receivables accounts corresponds to the above-identified posting logic.

For example, a gym ( financial year from 1 January to 31 December) sold on 1 December 2008 an annual pass for € 600. The money will be paid in cash immediately. The studio has so then actually taken for the year 2008 550 € "too much". This prorated € 550 for the period from January to November 2009 include income standard not especially since the customer among others also used the showers in 2009 and this caused 2009 Cost per year, without again in 2009 in the 2008 financial year, but in the year 2009 ( paying for it. )

Since the full € 600 are however already been credited to the account of the studio, the proportionate € 550 are accounted for next year as deferred income.

The gym has so on 31 December 2008 a kind of " liability " in power - owes it to the customer or the right to use the Studio 11 months - without having to pay for it again.

Transient and accrued items

In the balance sheet as deferred values ​​are reported separately as so-called prepaid expenses on both sides. These balance sheet items are also called transient post because it took place in the old year expenditure and revenue for even turnaround of services transferred for accounting purposes in the new year ( payment effectiveness - ie cash flow - in the old year, for a success effectiveness - ie power - in the new year ).

The reverse case is mapped via the so-called prepaid expenses. These are services took place in the old year, the first in the New Year lead to revenue and expenditure ( cash flow in the new year for a performance in the old year ). The success effectiveness is therefore anticipated here. An example of this includes interest income for the old year, which are due later in the new year to pay. In accordance with § 250 HGB and § 5 § 5 ITA accrued items are not to lead as RAP. In the balance sheet classification of these are the items " other receivables" ( on the asset side ) and "other liabilities" ( on the liabilities side ) are provided.

Legal regulation and exceptions

As a rule, for the balance sheet assets must be for prepaid expenses, see § 250 paragraph 3 HGB may be capitalized for the discount before. Will this be included in the RAP, it can be amortized over the entire term of the loan. This is appropriate because the discount rate is an equivalent which is spread over the period of use of capital.