Why is "Using the cash paid figure as the expense in the income statement without adjusting for accruals or prepayments." a common mistake in Other Payables and Other Receivables?

Why it happens: Students confuse the cash basis with the accruals basis of accounting. How to avoid it: Always check whether a time-apportionment or outstanding amount adjustment is needed. The income statement must reflect the expense for the period, not the cash paid. Source: Cambridge 0452 Examiner Reports 2022-2024

Why is "Showing accrued expenses as a current asset on the SFP instead of a current liability." a common mistake in Other Payables and Other Receivables?

Why it happens: Students confuse accruals (amounts owed by the business) with prepayments (amounts paid ahead). How to avoid it: Accrued expenses = business OWES money = liability. Prepayments = business has PAID in advance = asset. Use the mnemonic: Accruals = Owe (liability); Prepayments = Paid ahead (asset). Source: Cambridge 0452 Examiner Reports 2022-2024

Why is "Failing to time-apportion a payment that straddles two accounting periods." a common mistake in Other Payables and Other Receivables?

Why it happens: Students use the full amount paid rather than working out how much relates to the current period. How to avoid it: Identify the date range covered by the payment and calculate what fraction relates to the current year. For example, 3 months in the current year out of 12 months total = 3/12 of the payment. Source: Cambridge 0452 Examiner Reports 2022-2024

Accounting ProceduresCambridge IGCSE Accounting 0452

Other Payables and Other Receivables

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Other Payables and Other Receivables (Accruals and Prepayments) — Cambridge IGCSE Accounting 0452

The accruals (matching) concept requires that income and expenses are recognised in the period they are earned or incurred — not when cash is received or paid. Accrued expenses increase expenses and create a liability; prepaid expenses decrease expenses and create an asset. Similarly, accrued income increases income and creates an asset; deferred (prepaid) income decreases income and creates a liability.

At a glance

Accruals concept: income and expenses belong to the period in which they arise — not when cash moves.
Accrued expense (other payable): expense incurred but NOT YET PAID → increases expense; current liability on SFP.
Prepaid expense (other receivable/prepayment): expense PAID IN ADVANCE for next period → decreases expense; current asset on SFP.
Accrued income (income receivable): income EARNED but not yet received → increases income; current asset on SFP.
Prepaid income (deferred/income received in advance): income RECEIVED but not yet earned → decreases income; current liability on SFP.
Adjustments are made at the year-end BEFORE preparing financial statements.
After the year-end adjustment, the accrual/prepayment becomes the opening balance in the next period's ledger account.

What you’ll learn

Mapped to the Cambridge IGCSE 0452 syllabus (2026-2028).

Explain the accruals concept and apply it to expenses and income.
Calculate the adjusted expense and income figures for the income statement.
Show accruals and prepayments correctly in the income statement and statement of financial position.
Prepare ledger accounts (e.g. rent account) incorporating accruals and prepayments.
Distinguish between other payables, other receivables, and their SFP classification.

The Accruals (Matching) Concept

Match income and expenses to the period they relate to.

The accruals concept (also called the matching concept) states that income and expenses must be matched to the accounting period in which they are EARNED or INCURRED, regardless of when the cash actually moves.

Why this matters: Without accruals, a business that pays two years of rent in one year would show extremely high rent expense in year 1 and none in year 2 — this is misleading. The accruals concept ensures each period bears the correct charge.

Four types of adjustment at year-end:

Type	Situation	Effect on Expense/Income	SFP Classification
Accrued expense	Expense incurred, not yet paid	Increase expense	Current liability
Prepaid expense	Expense paid, relates to next period	Decrease expense	Current asset
Accrued income	Income earned, not yet received	Increase income	Current asset
Prepaid income	Income received, not yet earned	Decrease income	Current liability

Memory aid — APPLE:

Accrued expense: Liability (owe money)
Prepaid expense: Asset (paid in advance — future benefit)
Prepaid income: Liability (owe a service/good)
Ledger accounts carry the balance forward to next period
Expenses and income adjusted BEFORE financial statements are drafted

Match income and expenses to the period earned/incurred, not when cash moves.

Accruals concept: income/expense recognised when earned/incurred, not when paid.
Four adjustments: accrued expense, prepaid expense, accrued income, prepaid income.
Accrued items = balances b/d at the start of the next period.
All four adjustments are made at the year-end before preparing financial statements.

Accrued Expenses (Other Payables)

Expense incurred but not yet paid — add to the expense; liability on SFP.

An accrued expense arises when an expense has been INCURRED (used up) in the current period but has NOT YET BEEN PAID by the year-end.

Examples:

Wages earned by employees in the last week of the year but paid after the year-end
Electricity used in December but the bill arrives in January
Interest on a loan that has accrued but not been paid

Effect on financial statements:

Income statement: Expense is INCREASED by the accrual → profit decreases.
SFP: The accrual appears as a current liability (other payable) because the business owes this money.

Journal entry:

Dr Expense account (e.g. Wages)
Cr Accrued Expenses (liability)

Ledger account (e.g. Rent account):

Rent Account	Dr $	Cr $
Cash paid (3 quarters)	9 000	Income statement (4 quarters)
Accrual c/d (1 quarter owing)	3 000
	12 000
		Accrual b/d (liability at start of next year)

The income statement receives $12 000 (the full year's rent), even though only $9 000 was paid.

Expense incurred in current period but unpaid at year-end.
ADD the accrual to the expense in the income statement.
Show as current LIABILITY on SFP.
The accrual becomes the opening balance (Cr) in next period's ledger.

See the full worked example for other payables and other receivables →

Prepaid Expenses (Other Receivables / Prepayments)

Expense paid in advance — remove from expense; asset on SFP.

A prepaid expense (prepayment) arises when an expense has been PAID but the benefit extends INTO THE NEXT accounting period. The business has paid for something it has not yet used.

Examples:

Insurance premium of $1 200 paid in October covering the following 12 months: three months of this ($300) fall into next year.
Rent paid in advance for the next quarter at the end of the current year.

Effect on financial statements:

Income statement: Expense is DECREASED by the prepayment → profit increases.
SFP: The prepayment appears as a current asset (other receivable) because the business has a right to the future service.

Ledger account (e.g. Insurance account):

Insurance Account	Dr $	Cr $
Cash paid (full premium)	1 200	Income statement (9 months)
		Prepayment c/d (3 months)
	1 200
Prepayment b/d (asset start of next year)	300

The income statement receives only $900 (the 9 months used this year). The prepayment $300 is a current asset.

Expense paid for a future period — remove prepayment from this year's expense.
DEDUCT the prepayment from the expense in the income statement.
Show as current ASSET on SFP.
The prepayment becomes the opening balance (Dr) in next period's ledger.

Accrued Income and Prepaid Income

Income adjustments mirror expense adjustments.

Accrued income (income receivable): Income EARNED in the current period but NOT YET RECEIVED in cash.

Example: Rent receivable of $400 per month — one month's rent ($400) is owed to the business at year-end.

Income statement: INCREASE income by $400.
SFP: $400 shown as a current asset (other receivable — the business is owed this money).

Journal: Dr Accrued Income, Cr Rent Receivable (income account).

Prepaid income (income received in advance / deferred income): Cash RECEIVED for services not yet provided.

Example: A tenant pays $6 000 rent in advance covering 12 months from 1 October. The year-end is 31 December. Only 3 months ($1 500) has been earned; 9 months ($4 500) relates to next year.

Income statement: DECREASE income by $4 500 (only $1 500 earned this year).
SFP: $4 500 shown as a current liability (the business owes the service/refund).

Journal: Dr Rent Received (income), Cr Prepaid Income (liability).

Summary table:

Adjustment	Income statement	SFP
Accrued income	ADD	Current asset
Prepaid income	DEDUCT	Current liability

Accrued income: earned not received → ADD to income; current asset.
Prepaid income: received not earned → DEDUCT from income; current liability.
Both mirror the expense adjustment logic, applied to income.

How it’s examined

Accruals and prepayments appear in Paper 2 as part of the extended financial statements question (4-8 marks). Tasks: calculate adjusted expense/income for income statement (2-3 marks), identify SFP classification (1 mark each), prepare the ledger account including the year-end balance (4-6 marks). Cambridge examiners note that prepaid income is frequently misclassified as an asset rather than a liability.

Sources: Cambridge IGCSE Accounting 0452 Syllabus 2026-2028; 0452 Examiner Reports 2022-2024. Last reviewed 2026-05-13.

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Step-by-step worked examples — Other Payables and Other Receivables

Step-by-step solutions to past-paper-style questions on other payables and other receivables, written exactly the way a tutor would explain them at the board.

1Record an Accrual and Show SFP Treatment (8 marks)
Extended• Adapted from 0452 past paper• accrual, expense payable, income statement, SFP
Question
Tara's financial year ends on 31 December 2024. She pays rent quarterly in arrears. Payments made during 2024: 31 March $1 800; 30 June $1 800; 30 September $1 800. The December quarter has not yet been paid.

(a) Prepare the Rent account for the year ended 31 December 2024. (b) State the figures to appear in the income statement and SFP.
Step-by-step solution
1. Step 1
  Total rent for the year: 4 quarters × $1 800 = $7 200. Only 3 quarters paid = $5 400 cash paid. Accrual = $1 800 (the December quarter owed but not yet paid).
2. Step 2
  Rent Account (Dr): Dr side: Bank $1 800 (31 Mar), Bank $1 800 (30 Jun), Bank $1 800 (30 Sep), Accruals c/d $1 800 (31 Dec). Total Dr = $7 200. Cr side: Income Statement $7 200. Total Cr = $7 200.
3. Step 3
  Income statement: Rent expense = $7 200 (the full year charge, reflecting the accruals concept).
4. Step 4
  SFP: Accrued rent $1 800 appears as a current liability (other payables / accruals) because it is an amount owed at the year end.
Answer
Rent expense in income statement = $7 200. Accrued rent $1 800 = current liability on SFP.
Examiner tip
Marks awarded for: correct total in income statement ($7 200, not $5 400), correct accrual amount ($1 800), and correct SFP classification as current liability. A common error is putting the cash paid ($5 400) in the income statement.
2Record a Prepayment and Show SFP Treatment (8 marks)
Extended• Adapted from 0452 past paper• prepayment, expense receivable, income statement, SFP
Question
Dara's year ends 31 December 2024. On 1 October 2024 she paid insurance for 12 months: $3 600.

(a) Prepare the Insurance account for the year ended 31 December 2024. (b) State the income statement and SFP figures.
Step-by-step solution
1. Step 1
  Cash paid: $3 600 covers 1 Oct 2024 to 30 Sep 2025 (12 months). Period that relates to 2024: 1 Oct 2024 to 31 Dec 2024 = 3/12 of the policy. Insurance expense for 2024: $3 600 × 3/12 = $900. Prepayment (relates to 2025): $3 600 × 9/12 = $2 700.
2. Step 2
  Insurance Account: Dr side: Bank $3 600 (1 Oct). Total Dr = $3 600. Cr side: Income Statement $900; Prepayments c/d $2 700. Total Cr = $3 600.
3. Step 3
  Income statement: Insurance = $900 (3 months' portion that relates to 2024).
4. Step 4
  SFP: Prepaid insurance $2 700 = current asset (other receivables / prepayments), because the business has paid for a benefit not yet received.
Answer
Insurance expense in income statement = $900. Prepaid insurance $2 700 = current asset on SFP.
Examiner tip
Marks awarded for: correct time-apportionment of the payment, correct income statement figure, correct SFP treatment as current asset. A common error is using the full $3 600 as the expense.

Key Formulae — Other Payables and Other Receivables

The formulae you need to memorise for other payables and other receivables on the Cambridge IGCSE 0452 paper, with every variable defined in plain English and a note on when to use it.

Expense with Accrual
$Income statement expense = Cash paid + Accrual (amount owed at year end)$
$Cash paid$
Actual cash payments made during the period
$Accrual$
Amount owed for the period but not yet paid
When to use
When an expense has been incurred in the period but not yet paid.
Example
Rent paid $5 400; accrual $1 800 → income statement expense $7 200.
Expense with Prepayment
$Income statement expense = Cash paid − Prepayment (amount paid in advance for next period)$
$Cash paid$
Actual cash payments made during the period
$Prepayment$
Portion of payment relating to a future period
When to use
When an expense has been paid partly for a future period.
Example
Insurance paid $3 600; prepayment $2 700 → income statement expense $900.

Key Definitions and Keywords — Other Payables and Other Receivables

Definitions to memorise and the exact keywords mark schemes credit for other payables and other receivables answers — sharpened from recent examiner reports for the 2026 0452 sitting.

Accrued Expense (Accrual)
Examiner keyword
An expense that has been incurred during the accounting period but has not yet been paid by the year end. It is shown in the income statement as part of that period's expense and as a current liability (other payables) on the statement of financial position.
Prepayment (Prepaid Expense)
Examiner keyword
A payment made in the current period that relates wholly or partly to a future accounting period. The prepaid portion is deducted from the current year's expense in the income statement and shown as a current asset (other receivables) on the statement of financial position.
Accrued Income
Examiner keyword
Income that has been earned during the period but not yet received in cash by the year end. Added to the income figure in the income statement; shown as a current asset on the SFP.
Income Received in Advance (Deferred Income)
Examiner keyword
Cash received during the period that relates to a future accounting period. Deducted from income in the income statement; shown as a current liability on the SFP.
Accruals Concept (Matching Concept)
Examiner keyword
An accounting concept requiring that income and expenses are recognised in the period to which they relate, not when cash changes hands. This ensures the income statement reflects economic reality for the period.

Common Mistakes and Misconceptions — Other Payables and Other Receivables

The traps other students keep falling into on other payables and other receivables questions — taken from recent Cambridge IGCSE 0452 examiner reports and mark schemes — and how to avoid them.

✕Using the cash paid figure as the expense in the income statement without adjusting for accruals or prepayments.
Cambridge 0452 Examiner Reports 2022-2024
Why it happens
Students confuse the cash basis with the accruals basis of accounting.
How to avoid it
Always check whether a time-apportionment or outstanding amount adjustment is needed. The income statement must reflect the expense for the period, not the cash paid.
✕Showing accrued expenses as a current asset on the SFP instead of a current liability.
Cambridge 0452 Examiner Reports 2022-2024
Why it happens
Students confuse accruals (amounts owed by the business) with prepayments (amounts paid ahead).
How to avoid it
Accrued expenses = business OWES money = liability. Prepayments = business has PAID in advance = asset. Use the mnemonic: Accruals = Owe (liability); Prepayments = Paid ahead (asset).
✕Failing to time-apportion a payment that straddles two accounting periods.
Cambridge 0452 Examiner Reports 2022-2024
Why it happens
Students use the full amount paid rather than working out how much relates to the current period.
How to avoid it
Identify the date range covered by the payment and calculate what fraction relates to the current year. For example, 3 months in the current year out of 12 months total = 3/12 of the payment.

Practice questions

Exam-style questions with step-by-step worked solutions. Try one before checking the method.

Past paper style quiz

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Other Payables and Other Receivables (Accruals and Prepayments) — Cambridge IGCSE Accounting 0452

Type

Situation

Effect on Expense/Income

SFP Classification

Accrued expense

Expense incurred, not yet paid

Increase expense

Current liability

Prepaid expense

Expense paid, relates to next period

Decrease expense

Current asset

Accrued income

Income earned, not yet received

Increase income

Current asset

Prepaid income

Income received, not yet earned

Decrease income

Current liability

Rent Account

Dr $

Cr $

Cash paid (3 quarters)

9 000

Income statement (4 quarters)

Accrual c/d (1 quarter owing)

3 000

12 000

Accrual b/d (liability at start of next year)

Insurance Account

Dr $

Cr $

Cash paid (full premium)

1 200

Income statement (9 months)

Prepayment c/d (3 months)

1 200

Prepayment b/d (asset start of next year)

300

Adjustment

Income statement

SFP

Accrued income

ADD

Current asset

Prepaid income

DEDUCT

Current liability

Other Payables and Other Receivables

Short Study Notes in the form of Slides

Short Study Notes — Other Payables and Other Receivables

Detailed Notes

What you’ll learn

How it’s examined

1Record an Accrual and Show SFP Treatment (8 marks)

2Record a Prepayment and Show SFP Treatment (8 marks)

Expense with Accrual

Expense with Prepayment

Accrued Expense (Accrual)

Prepayment (Prepaid Expense)

Accrued Income

Income Received in Advance (Deferred Income)

Accruals Concept (Matching Concept)

✕Using the cash paid figure as the expense in the income statement without adjusting for accruals or prepayments.

✕Showing accrued expenses as a current asset on the SFP instead of a current liability.

✕Failing to time-apportion a payment that straddles two accounting periods.

Practice questions

Past paper style quiz

Other Payables and Other Receivables

Short Study Notes in the form of Slides

Short Study Notes — Other Payables and Other Receivables

Detailed Notes

What you’ll learn

How it’s examined

1Record an Accrual and Show SFP Treatment (8 marks)

2Record a Prepayment and Show SFP Treatment (8 marks)

Expense with Accrual

Expense with Prepayment

Accrued Expense (Accrual)

Prepayment (Prepaid Expense)

Accrued Income

Income Received in Advance (Deferred Income)

Accruals Concept (Matching Concept)

✕Using the cash paid figure as the expense in the income statement without adjusting for accruals or prepayments.

✕Showing accrued expenses as a current asset on the SFP instead of a current liability.

✕Failing to time-apportion a payment that straddles two accounting periods.

Practice questions

Past paper style quiz