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Accrued and Prepaid Income massive confusion ........

  • Fellow PM.Dip
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  • # 112859

Hi all

I have spent hours trying to get me head around this and simply cant!

On page 533, Workbook activity 2 as for you to calculate the total membership fees (for Toptown Table Tennis Club) to be shown as income in the I & E account and how the fees paid in advance would show on the Balance Sheet.

Following all previous examples and as many from the internet as I can find I understand that Prepaid membership fees show on the Balance sheet as a credit as they are a liability, hence opening Prepaid income is a Credit and Opening accrued income is consequently a Debit.

If this is true then why in the answer on page 602 do they have the closing accrual balance on the debit side? Surely this should be a credit so that it transfers to the BS as a debit?

Likewise in the Revision Manual on page 74 (Simontown Youth Club) the trial balance has the closing accrual as a credit.


Please can somebody explain what on earth is going on here as I cant see any logic to it.

I would really appreciate someones help as I feel like I am going mad 



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  • # 112860

Hi Kate,

If you are on about the level 3 Kaplan revision book, then I had the same issue.  The (only) club accounts question shows accrued subscriptions on the balance sheet as a current liability... the ICB assessment and all my training provider material stated that accrued subs are an asset and prepaid subs a liability. So, I just disregarded that question in the book, a little disappointing I know, but better than causing a meltdown!

I found a few things in the Kaplan book that are now either obsolete or changed since it was published.

Hope that helps!


Edited at 24 Apr 2016 04:57 PM GMT

  • Member PM.Dip
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  • # 112871

Hello Kate

As you haven't had a response yet, I will have a bash.

I have no idea of the workbook or question you are trying to resolve but i think you probably need to rethink this in the context of the question.

Accruals and prepayments are normally associated with the expenses of a business.  So accruals would be a debit to the expense account in the P&L and credit the accruals account in the BS.  The opposite would therefore be true for prepaid expenses.

However, in your example you refer to prepaid INCOME. It therefore follows that such prepaid income would show as a debit to the 'sales' or income account in the P&L and consequently a credit on the BS.  

So do the examples you have looked at refer to income or expenditure or perhaps both, and are you confusing the two?  

Danny, It it looks as though you may be referring to prepaid subs being an expense and so opposite to Katie's initial query.  Before dismissing questions and answers that you dont understand as errors in text books perhaps rethink them thoroughly.  I have not studied for a very long time but Kaplan are and always have been very well respected study materials I'm pretty sure it is unlikey there are many, if any, errors within them.

i hope I have given you some pointers to rethink this And have helped a little.

good luck

  • Fellow PM.Dip
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Hello and thank you so much for taking the time to reply.

I have had another look at both of the questions and still think they may be incorrect...

I am referring to Income Accrued and Prepaid, not expenses.

I agree that the balance sheets should show the accued income as a debit and the prepaid income as a credit which contradites the two questions in the revision manual and the study manual.

The study text manual answer has the closing accrual as a debit on the income account which would put it as a credit on the Balance sheet.

The revision manual has the balances bought forward on the trail balance with Members subs in arrears as a credit ( i think it is safe to assume these are opening balances as the closing accrual amount is stated in the notes that follow)

So correct me if I am wrong but simply put, Opening accrued income is a debit on the income account, the closing accrued income is a credit to tansfer down to the BS as a Debit. Consequently, opening prepaid income is a credit on the income account, closing prepaid income is a debit on the income account to  be transfered to the BS as a credit.......

Really appreciate your help - thank you

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  • # 112877


I am not studying, so I have no idea of the details of the question or any reference/study material you may have.  I am therefore trying to view this from a practical point of view.  ie  how this works in a business set of accounts.

in my opinion it seems you may be looking at this in reverse.

At the start of a new accounting period there would be no opening balance in an income account, opening balances would be sitting in the balance sheet.  There would be no balances in any of the revenue accounts.  Your opening TB would only show balance sheet accounts.

so as we have already established the opening balance in the accrued income account (BS) would be a debit.  In the new period that would be transferred to the income account - cr accrued income(BS)/debit income (P&L). 

the opposite would be true for prepaid income

I dont quite follow your comment regarding transferring to the balance sheet. In a new accounting period you would surely be 'tranfering' the balance to the relevant revenue account providing circumstances demanded it.

hope I am not totally misunderstanding your dilemma.  Try writing it down step by step 


  • Fellow PM.Dip
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  • # 112878

The only way to sort out this without confusing myself even more is to tell you the question:

A table tennis club has received membership fees of £3600 during the year ended 31.12X5 . At 01.01.X5 membership fees of £30 had been paid in advance and at 31.12.X5 fees of £20 were outstanding.

1. Calculate the total membership fees to be shown as income in the I & E account for the year ended 31.12.X5

2. State how the membership fees pad in advance will be shown in the Balance Sheet at 31.12.X5


I made the following answer

Fees paid in advance at 1.1.X5 CR Income Account 30

Fees received during the year CR Income Account 3600

Fees OS Fees at 31.12.X5 CR Income Account 20

However, the answer puts the OS fees at 31.12X5 as a DR entry on the Income account - This is the bit I dont get as in all previous examples the closing accrual is a DR in the Income account



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