Accrual is a provision made at the end of the financial year (or month-end closing) for the work done but not yet invoiced. The audit fee is an accrued expense which a provision has to make for the current year audit work, although the invoice will only receive on the following year.
You can use a General Journal to record an accrual, such as debit the audit fee (expense) and credit accrued expenses (current liabilities).
Prepayment is a payment made for future goods or services. General Insurance and maintenance contract is a prepaid expense. For example, your financial year-end is December, and you received a notice for insurance premium for insurance coverage from September to August next year. In this case, September to December is your current year insurance expense whereas January to August is a prepayment for the following year.
Assuming the insurance premium is $1,200, you can use a Purchase Invoice or Payment transaction (if there is no invoice received) to record it. Enter a General Journal in the current year to debit prepayment (current asset) and credit insurance expense ($800) for the premium from January to August next year. Then, reverse the General Journal on the following year to debit the insurance expense and credit prepayment.
You should claim the input tax according to the date on Tax Invoice or Import Permit. Please consult your accountant on claiming of GST input tax which relates to accrual and prepayment.
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