Why is "Treating the cash paid as the expense for the year." a common mistake in Other receivables and payables?

Why it happens: Cash basis thinking. How to avoid it: The income statement uses the ACCRUALS basis. Always ask: what relates to THIS year? Adjust cash paid up for accruals, down for prepayments. Source: Edexcel 4AC1 examiner reports.

Why is "Adding prepayments and subtracting accruals (or vice versa) when adjusting cash to the income statement figure." a common mistake in Other receivables and payables?

Why it happens: Direction confusion under exam pressure. How to avoid it: **Memorise:** Cash paid + accrual (add expense unpaid) − prepayment (subtract future-period payment) = Expense for the year. The opposite for income.

Why is "Calling an accrued expense an 'other receivable' or a prepayment an 'other payable'." a common mistake in Other receivables and payables?

Why it happens: Word confusion. How to avoid it: **Accrued expense** = something you OWE (current liability). **Prepayment** = something you've ALREADY PAID FOR (current asset). The Dr/Cr direction follows.

Why is "Apportioning by months but miscounting the months in the current year." a common mistake in Other receivables and payables?

Why it happens: Counting errors. How to avoid it: Draw a timeline. Mark the year-end. Count months on each side carefully. £1,800 paid 1 Oct for 12 months → 3 months (Oct, Nov, Dec) in current year, 9 months in next year.

Why is "Adjusting cash paid for BOTH the closing prepayment AND not recognising the opening prepayment." a common mistake in Other receivables and payables?

Why it happens: Students forget to undo last year's prepayment, which is consumed this year. How to avoid it: Use the full formula: Expense = Cash + Closing accrual − Opening accrual − Closing prepayment + Opening prepayment.

Why is "Combining 'Other Receivables' with 'Trade Receivables' on the SOFP." a common mistake in Other receivables and payables?

Why it happens: Both are receivables. How to avoid it: Trade Receivables arise from sales of goods/services (customers). Other Receivables arise from prepayments, accrued income, etc. Show them as SEPARATE current-asset lines.

Why is "Posting a year-end accrual/prepayment journal without a narrative." a common mistake in Other receivables and payables?

Why it happens: Time pressure. How to avoid it: Every journal entry needs a narrative. For accruals/prepayments, a one-line explanation makes the adjustment auditable and earns the narrative mark.

Introduction to Book KeepingPearson Edexcel IGCSE Accounting 4AC1

Other receivables and payables

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Other Receivables and Payables — Edexcel IGCSE Accounting (4AC1) Detailed Notes

Accruals, prepayments, income receivable and income received in advance. The four adjustments that turn cash-basis figures into accruals-basis figures — and the cornerstone of every year-end question in Paper 2.

What you’ll learn

Mapped to the Pearson Edexcel IGCSE 4AC1 syllabus (2026 onwards).

Distinguish between accrued and prepaid expenses, and between income receivable and income in advance.
Calculate the income statement figure for an expense given cash paid plus accruals and prepayments.
Calculate the income statement figure for an income item given cash received plus receivable and in-advance amounts.
Prepare the journal entries for year-end adjustments.
Present accruals and prepayments correctly on the SOFP as Other Payables / Other Receivables.
Explain the link between these adjustments and the matching (accruals) concept.

Why year-end adjustments are needed

Cash flows don't always align with the periods that benefit — adjustments restore the match.

Imagine a business with a December year-end. On 1 October it pays £1,800 for 12 months' insurance. By 31 December:

Cash has been paid: £1,800.
BUT only 3 months' worth of insurance (Oct, Nov, Dec) relates to the current year — £450.
The remaining 9 months (Jan–Sep next year) is a prepayment — a future benefit already paid for.

If we charged the full £1,800 to this year, we would:

Overstate expenses (and understate profit) this year.
Understate expenses (and overstate profit) next year.

The matching concept requires recognising £450 this year and carrying £1,350 forward as a current asset.

Match adjustment type → SOFP classification: expenses pair with payables/receivables, income mirrors the rule.

This logic applies to four types of adjustment:

Adjustment	Cash event	Period match	SOFP classification
Accrued expense	Not yet paid	Incurred this year	Current liability (Other Payable)
Prepaid expense	Paid this year	Relates to next year	Current asset (Other Receivable)
Income receivable	Not yet received	Earned this year	Current asset (Other Receivable)
Income in advance	Received this year	Earned next year	Current liability (Other Payable)

Cash flow ≠ income statement figure.
Adjustments align cash to the period that benefits.
Four types: accrual, prepayment, income receivable, income in advance.

Accrued expense (Other Payable)

Expense incurred this period but unpaid at year-end. Adds to expense; current liability.

Definition. An expense incurred during the current accounting period that has NOT been paid by the year-end. It is recognised as both:

An additional expense in the income statement.
A current liability on the SOFP.

Example. Rent £6,000 per year, paid quarterly in arrears. By year-end, three quarters totalling £4,500 have been paid. The fourth quarter (£1,500) is incurred but unpaid → accrued rent £1,500.

Journal at year-end:

Dr Rent (income statement) £1,500
Cr Accrued Rent / Other Payables £1,500

Income statement effect: Rent expense = £4,500 paid + £1,500 accrued = £6,000.

SOFP effect: Accrued Rent (current liability) = £1,500.

Reversal next year: The accrual is paid off when the Q4 rent is paid in the new year. No special entry is needed — the payment is recorded as usual (Dr Rent, Cr Bank) and the opening accrual cancels out (Dr Accrued Rent, Cr Rent).

Expense + accrual → income statement.
Accrued amount → SOFP current liability.
Cancels naturally when paid next year.

Prepaid expense (Other Receivable)

Paid this period but relating to a future period. Reduces expense; current asset.

Definition. A payment made in the current period for a benefit that will be received in a FUTURE period. It is recognised as:

A reduction of the expense in the income statement (only the portion relating to the current period is the period's expense).
A current asset on the SOFP.

Example. Insurance £1,800 paid on 1 Oct for 12 months. Year-end 31 Dec. Current year portion = 3 months = £450. Prepaid = 9 months = £1,350.

Journal at year-end:

Dr Prepaid Insurance / Other Receivables £1,350
Cr Insurance (income statement) £1,350

Income statement effect: Insurance expense = £1,800 paid − £1,350 prepaid = £450.

SOFP effect: Prepaid Insurance (current asset) = £1,350.

Reversal next year: As the 9 months elapse, the prepayment is consumed and becomes an expense (Dr Insurance, Cr Prepaid Insurance) over the new year.

Cash paid − prepayment → income statement expense.
Prepaid amount → SOFP current asset.
Consumed across the next period.

Income receivable (Other Receivable)

Income earned this period but not yet received. Adds to income; current asset.

Definition. Income (such as rent received, commission, interest, subscriptions) that has been earned during the current period but has not been received by year-end.

Example. Sub-let rent of £400/month. Tenant owes 2 months at year-end. Cash received during year = £4,000.

Income earned for the year = 12 × £400 = £4,800. Income receivable = 2 × £400 = £800.

Journal at year-end:

Dr Rent Receivable / Other Receivables £800
Cr Rent Received (income statement) £800

Income statement: Rent Received = £4,000 cash + £800 receivable = £4,800.

SOFP: Rent Receivable (current asset) = £800.

Cash received + receivable → income statement.
Receivable amount → SOFP current asset.
Different from Trade Receivables — sits on a separate line.

Income received in advance (Other Payable)

Received this period but earned next period. Reduces income; current liability.

Definition. Income received in cash during the current period but relating to a service to be delivered in a FUTURE period. The business has the cash but has not yet earned it — so prudence demands it be deferred.

Example. A club received £600 in December for subscriptions covering the following year. Year-end is 31 December.

Journal at year-end:

Dr Subscriptions / Income £600
Cr Subscriptions in Advance / Other Payables £600

Income statement effect: Subscription Income reduced by £600.

SOFP effect: Subscriptions in Advance (current liability) = £600.

Next year: As the service is delivered, the deferred income is released to the income statement (Dr Subscriptions in Advance, Cr Subscriptions).

Cash received − in advance → income statement income.
Amount in advance → SOFP current liability.
Released as income over the next period.

The master formulae — apply them every time

Two formulae cover every adjustment. Memorise them.

Expense for the period:

$\text{Expense} = \text{Cash Paid} + \text{Closing Accrual} - \text{Opening Accrual} - \text{Closing Prepayment} + \text{Opening Prepayment}$

Income for the period:

$\text{Income} = \text{Cash Received} + \text{Closing Income Receivable} - \text{Opening Income Receivable} - \text{Closing Income in Advance} + \text{Opening Income in Advance}$

Logic:

Add anything CLOSING that should be in this year's figure (closing accrual = unpaid expense this year; closing receivable = unreceived income this year).
Subtract anything CLOSING that shouldn't be (closing prepayment = next year's expense paid this year; closing in advance = next year's income received this year).
Subtract last year's closing that's now consumed (opening accrual now paid; opening receivable now received).
Add last year's closing that's now reversed in the right direction (opening prepayment now consumed; opening in advance now earned).

Presentation on the SOFP

Always show as separate lines under 'Other Receivables' / 'Other Payables'.

Current Assets section:

Current Assets	£
Inventory	X
Trade Receivables	X
Other Receivables (prepayments + income receivable)	X
Bank	X
Cash	X

Current Liabilities section:

Current Liabilities	£
Trade Payables	X
Other Payables (accruals + income in advance)	X
Bank Overdraft	X

In some textbooks (and in clubs and societies in Topic 4), these lines may be split further — e.g., 'Prepayments £X, Income Receivable £Y' — which is also acceptable.

How it’s examined

Paper 1: Direct calculation of the expense/income figure given cash and adjustments (4–6 marks); journal entries for year-end adjustments (4 marks).

Paper 2: Embedded in financial statement preparation — applying adjustments to derive expense/income figures and present current assets/liabilities correctly. Always worth 6–10 marks within a larger question.

Common stems: 'Calculate the [expense] for the year ended…', 'State the amount that would appear in the SOFP at year-end for…', 'Show the journal entry to account for…', 'Explain the meaning of accrued / prepaid…'

Sources: Pearson Edexcel International GCSE in Accounting (4AC1) Specification — Issue 3; Edexcel 4AC1 Examiner Reports (2022–2024). Last reviewed 2026-05-19.

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Step-by-step worked examples — Other receivables and payables

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

1Calculate an accrued expense (other payable)
Building confidence• Edexcel 4AC1 style — calculation (5 marks)• accrual, AO1, AO2
Question
Rent is £6,000 per year, paid quarterly in arrears (i.e., at the end of each quarter). During the year ended 31 December 2026, the business paid £4,500 (three quarters). Calculate (a) the rent expense for the year, (b) the accrued rent at 31 December 2026, (c) the journal entry.
Step-by-step solution
1. Step 1
  The year's rent expense = the rent that RELATES to the year, regardless of payment timing.
2. Step 2
  Accrual = amount incurred but unpaid at year-end.
Answer
(a) Rent expense = £6,000 (the full year's rent — matching concept).

(b) Accrued rent at 31 Dec = £6,000 incurred − £4,500 paid = £1,500 (one quarter unpaid).

(c) Journal at 31 Dec 2026:

Dr Rent (income statement) £1,500

Cr Accrued Rent / Other Payables (SOFP — current liability) £1,500 (Recognition of rent for Q4 incurred but unpaid at year-end.)

The accrued rent £1,500 sits on the SOFP as a current liability (Other Payables).
Examiner tip
A* candidates separately state (a) the IS figure, (b) the SOFP liability, and (c) the journal. Many candidates produce the right number but lose the SOFP presentation mark.
2Calculate a prepaid expense (other receivable)
Building confidence• Edexcel 4AC1 style — calculation (5 marks)• prepayment, AO1, AO2
Question
On 1 October 2026, the business paid £1,800 for insurance covering 12 months from 1 October 2026 to 30 September 2027. Year-end is 31 December 2026. Calculate (a) the insurance expense for the year, (b) the prepaid insurance at 31 December.
Step-by-step solution
1. Step 1
  Only the portion relating to the current year (Oct, Nov, Dec — 3 months) is the period's expense.
  $Expense = £1,800 × 3/12$
2. Step 2
  The remaining 9 months (Jan–Sep 2027) is a prepayment — paid in 2026, but for 2027's benefit.
Answer
(a) Insurance expense for 2026 = £1,800 × 3/12 = £450 (Oct, Nov, Dec).

(b) Prepaid insurance at 31 Dec 2026 = £1,800 × 9/12 = £1,350 (9 months relating to 2027).

Journal at 31 Dec 2026:

Dr Prepaid Insurance / Other Receivables (SOFP — current asset) £1,350

Cr Insurance (income statement) £1,350 (Adjust insurance expense to recognise only the 3 months relating to 2026; £1,350 is for next year.)

The prepaid insurance £1,350 sits on the SOFP as a current asset (Other Receivables).
Examiner tip
Time-apportionment errors are common. Always identify (i) the period the payment covers and (ii) the portion of that period falling in the current accounting year.
3Calculate income receivable at year-end
Higher• Edexcel 4AC1 style — calculation (6 marks)• income-receivable, AO1, AO2
Question
The business sub-lets part of its premises for £400 per month. At 31 December 2026, the tenant owes 2 months' rent. During the year, £4,000 was received. Calculate (a) rent received for the year, (b) the rent receivable at 31 December, (c) the journal entry.
Step-by-step solution
1. Step 1
  Rent earned for the year = 12 months × £400 = £4,800 (matching concept).
2. Step 2
  Cash received £4,000; outstanding £800 (2 months × £400).
Answer
(a) Rent earned (income statement) = 12 × £400 = £4,800.

(b) Rent receivable at 31 Dec 2026 = 2 × £400 = £800 (outstanding from tenant).

(c) Journal at 31 Dec 2026:

Dr Rent Receivable / Other Receivables (SOFP — current asset) £800

Cr Rent Received (income statement) £800 (Recognise rent earned but not yet received at year-end.)

Rent Receivable £800 sits on the SOFP as a current asset.
Examiner tip
Note: Rent receivable is not the same as Trade Receivables (which arise from sales of goods). It's classified as 'Other Receivables' on the SOFP.
4Calculate income received in advance
Higher• Edexcel 4AC1 style — calculation (6 marks)• subscriptions, advance, arrears, AO1, AO2, AO3
Question
Subscription income is £200 per member per year. At 31 December 2026, the business had received £4,800 in subscriptions, of which £600 related to 2027. There were also two members who had not yet paid their 2026 subscriptions at year-end. Calculate (a) subscription income for the year, (b) subscriptions in advance, (c) subscriptions in arrears, (d) prepare the journal entries.
Step-by-step solution
1. Step 1
  Cash received £4,800. Of that, £600 belongs to 2027 — it must be REMOVED from current-year income.
2. Step 2
  Two members owe £200 each for 2026 — must be ADDED to current-year income (income receivable).
3. Step 3
  Current year subscription income = £4,800 − £600 + £400 = £4,600.
Answer
(a) Subscription income for 2026 = £4,800 − £600 (in advance) + £400 (in arrears) = £4,600.

(b) Subscriptions in advance (current liability) = £600.

(c) Subscriptions in arrears (current asset) = 2 × £200 = £400.

Journal entries at 31 Dec 2026:

To recognise subscriptions received in advance (liability):

Dr Subscriptions (income statement) £600

Cr Subscriptions in Advance / Other Payables £600

To recognise subscriptions in arrears (asset):

Dr Subscriptions in Arrears / Other Receivables £400

Cr Subscriptions (income statement) £400

SOFP extracts:

Current Assets: Subscriptions in Arrears £400.

Current Liabilities: Subscriptions in Advance £600.

Note: Some teachers (and clubs and societies questions) NETT these to a single figure; Edexcel allows both presentations.
Examiner tip
A* candidates handle in advance AND in arrears in the SAME question without netting them off (unless asked). Clubs and societies questions in Topic 4 routinely use this pattern.
5Classify each year-end item as accrual / prepayment / receivable / in advance
Building confidence• Edexcel 4AC1 style — short-answer (4 marks)• classification, AO1
Question
Classify each year-end situation: (a) Electricity bill for December has been received but not yet paid. (b) Insurance was paid in October for 12 months. (c) A tenant owes rent for the last two months of the year. (d) Subscriptions for next year have been received in advance.
Step-by-step solution
1. Step 1
  Match each scenario to the four classifications.
Answer
(a) Accrued expense (Other Payable).

(b) Prepaid expense (Other Receivable — 9 months relate to next year).

(c) Income receivable (Other Receivable).

(d) Income in advance (Other Payable).
Examiner tip
Two dimensions: (cash flow vs benefit period) × (expense vs income). A 2×2 grid covers all four cases.
6State the SOFP line for each year-end adjustment
Building confidence• Edexcel 4AC1 style — short-answer (4 marks)• sofp-classification, AO1
Question
State which SOFP line each item appears on: (a) Accrued wages £500. (b) Prepaid insurance £900. (c) Rent receivable £400. (d) Subscriptions in advance £600.
Step-by-step solution
1. Step 1
  Asset items → Current Assets (Other Receivables). Liability items → Current Liabilities (Other Payables).
Answer
(a) Current Liabilities — Other Payables £500.

(b) Current Assets — Other Receivables £900.

(c) Current Assets — Other Receivables £400.

(d) Current Liabilities — Other Payables £600.
Examiner tip
Don't mix Trade Receivables (customers for goods/services) with Other Receivables (prepayments, rent, etc.). Show them as separate SOFP lines.
7Identify the income statement and SOFP effects of each adjustment
Higher• Edexcel 4AC1 style — short-answer (4 marks)• effects, AO1, AO2
Question
State the income-statement and SOFP effect of each year-end adjustment: (a) Accrued electricity £300. (b) Prepaid rent £500. (c) Rent receivable £200. (d) Income received in advance £400.
Step-by-step solution
1. Step 1
  Each adjustment hits two places — IS and SOFP.
Answer
(a) IS: Electricity expense ↑ £300. SOFP: Current Liability (Other Payables) ↑ £300.

(b) IS: Rent expense ↓ £500. SOFP: Current Asset (Other Receivables) ↑ £500.

(c) IS: Rent income ↑ £200. SOFP: Current Asset ↑ £200.

(d) IS: Subscription income ↓ £400. SOFP: Current Liability ↑ £400.
Examiner tip
Every year-end adjustment has TWO effects — they're double-entry. A* candidates always state both.
8Apply multiple adjustments to calculate the net profit
Higher• Edexcel 4AC1 style — multi-part (8 marks)• multi-step, adjustments, AO1, AO2
Question
A business has draft profit of £52,000. Year-end review reveals: (a) Accrued wages £1,200 (not recorded). (b) Prepaid insurance £800 (included in this year's expenses). (c) Rent receivable £400 (not recorded). (d) Subscriptions received in advance £600 (currently included in income).

Calculate the corrected profit.
Step-by-step solution
1. Step 1
  Each adjustment changes the IS figure: accrued expenses ↓ profit; prepayments ↑ profit; income receivable ↑ profit; income in advance ↓ profit.
Answer
Adjustments to profit:

Accrued wages: profit ↓ £1,200 (expense was understated).

Prepaid insurance: profit ↑ £800 (expense was overstated).

Rent receivable: profit ↑ £400 (income was understated).

Subscriptions in advance: profit ↓ £600 (income was overstated).

Corrected profit = £52,000 − £1,200 + £800 + £400 − £600 = £51,400
Examiner tip
The signs trap many candidates. Memorise: accrued/in-advance reduce profit; prepaid/receivable increase profit. Or just apply matching: only this year's income and this year's expenses count.
9Calculate rent receivable income across two periods
Higher• Edexcel 4AC1 style — multi-part (8 marks)• rent-receivable, AO1, AO2
Question
The business sub-lets a property at £600/month. At 1 January 2026 a tenant owed 1 month's rent (£600 — opening receivable). During 2026, the business received £8,400 in rent. At 31 December 2026, the tenant has paid 2 months in advance for 2027 (£1,200) and another tenant owes the December rent (£600). Calculate (a) rent income for 2026, (b) the SOFP entries.
Step-by-step solution
1. Step 1
  Use the master income formula: Income = Cash + closing receivable − opening receivable − closing in advance + opening in advance.
Answer
(a) Rent income = £8,400 + £600 (closing receivable) − £600 (opening receivable) − £1,200 (closing in advance) + £0 (no opening in advance) = £7,200

(Check: 12 months × £600 = £7,200 ✓.)

(b) SOFP entries at 31 Dec 2026:

Current Assets — Other Receivables (Rent in arrears): £600.

Current Liabilities — Other Payables (Rent in advance): £1,200.
Examiner tip
The 12 × £600 = £7,200 check is what shows the marker you've understood — not just substituted numbers. Always cross-check using the underlying logic of matching.

Key Formulae — Other receivables and payables

The formulae you need to memorise for other receivables and payables on the Pearson Edexcel IGCSE 4AC1 paper, with every variable defined in plain English and a note on when to use it.

Expense recognised in the period
$Expense for Period = Cash Paid + Closing Accrual − Opening Accrual − Closing Prepayment + Opening Prepayment$
$Cash Paid$
Total payments made during the year
$Closing Accrual$
Expense incurred but unpaid at year-end (liability)
$Opening Accrual$
Last year's closing accrual now being paid
$Closing Prepayment$
Paid in advance at year-end for next year's benefit (asset)
$Opening Prepayment$
Last year's closing prepayment now being consumed
When to use
When the question provides cash paid but you need to compute the income-statement charge — and accruals/prepayments adjust for timing.
Example
Cash paid £14,000; opening accrual £1,000; closing prepayment £2,000. Expense = £14,000 + 0 − £1,000 − £2,000 + 0 = £11,000.
Income recognised in the period
$Income for Period = Cash Received + Closing Income Receivable − Opening Income Receivable − Closing Income in Advance + Opening Income in Advance$
$Cash Received$
Total cash received during the year
$Closing Income Receivable$
Earned but not yet received at year-end (asset)
$Opening Income Receivable$
Last year's closing receivable, now received
$Closing Income in Advance$
Received but not yet earned (liability)
$Opening Income in Advance$
Last year's closing in-advance, now earned
When to use
Mirror of the expense formula. Apply when the question gives cash received but you need the income-statement figure.
Example
Cash £4,000 + Closing receivable £800 = £4,800 rent earned this year.
Quick rule for any account
$IS figure = Cash flow ± Adjustment to match income to the period earned/expense to the period incurred$
$IS figure$
The amount shown on the income statement
$Cash flow$
Cash paid (for expenses) or cash received (for income)
When to use
Whenever a year-end accrual/prepayment adjustment is required.
Example
See examples in the worked answers.

Key Definitions and Keywords — Other receivables and payables

Definitions to memorise and the exact keywords mark schemes credit for other receivables and payables answers — sharpened from recent examiner reports for the 2026 Pearson Edexcel IGCSE 4AC1 sitting.

Accrued expense / Accrual / Other payable
Examiner keyword
An expense that has been INCURRED in the current period but is UNPAID at the year-end. Recognised as a current liability on the SOFP and added to the relevant expense on the income statement.
Prepaid expense / Prepayment / Other receivable
Examiner keyword
An expense PAID in the current period but relating (wholly or partly) to a FUTURE period. Recognised as a current asset on the SOFP and deducted from the expense on the income statement.
Income receivable / Other receivable
Examiner keyword
Income EARNED in the current period but not yet RECEIVED at year-end. Recognised as a current asset on the SOFP and added to the relevant income on the income statement.
Income received in advance / Deferred income / Other payable
Examiner keyword
Income RECEIVED in the current period but relating to a FUTURE period. Recognised as a current liability on the SOFP and deducted from the income on the income statement.
Matching (accruals) concept
Examiner keyword
Income is recognised when earned and expenses when incurred, regardless of cash flow. Drives every accrual/prepayment adjustment.

Common Mistakes and Misconceptions — Other receivables and payables

The traps other students keep falling into on other receivables and payables questions — taken from recent Pearson Edexcel IGCSE 4AC1 examiner reports and mark schemes — and how to avoid them.

✕Treating the cash paid as the expense for the year.
Edexcel 4AC1 examiner reports.
Why it happens
Cash basis thinking.
How to avoid it
The income statement uses the ACCRUALS basis. Always ask: what relates to THIS year? Adjust cash paid up for accruals, down for prepayments.
✕Adding prepayments and subtracting accruals (or vice versa) when adjusting cash to the income statement figure.
Why it happens
Direction confusion under exam pressure.
How to avoid it
Memorise: Cash paid + accrual (add expense unpaid) − prepayment (subtract future-period payment) = Expense for the year. The opposite for income.
✕Calling an accrued expense an 'other receivable' or a prepayment an 'other payable'.
Why it happens
Word confusion.
How to avoid it
Accrued expense = something you OWE (current liability). Prepayment = something you've ALREADY PAID FOR (current asset). The Dr/Cr direction follows.
✕Apportioning by months but miscounting the months in the current year.
Why it happens
Counting errors.
How to avoid it
Draw a timeline. Mark the year-end. Count months on each side carefully. £1,800 paid 1 Oct for 12 months → 3 months (Oct, Nov, Dec) in current year, 9 months in next year.
✕Adjusting cash paid for BOTH the closing prepayment AND not recognising the opening prepayment.
Why it happens
Students forget to undo last year's prepayment, which is consumed this year.
How to avoid it
Use the full formula: Expense = Cash + Closing accrual − Opening accrual − Closing prepayment + Opening prepayment.
✕Combining 'Other Receivables' with 'Trade Receivables' on the SOFP.
Why it happens
Both are receivables.
How to avoid it
Trade Receivables arise from sales of goods/services (customers). Other Receivables arise from prepayments, accrued income, etc. Show them as SEPARATE current-asset lines.
✕Posting a year-end accrual/prepayment journal without a narrative.
Why it happens
Time pressure.
How to avoid it
Every journal entry needs a narrative. For accruals/prepayments, a one-line explanation makes the adjustment auditable and earns the narrative mark.

Practice questions

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

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Other receivables and payables

Short Study Notes in the form of Slides

Short Study Notes — Other receivables and payables

Detailed Notes

What you’ll learn

How it’s examined

1Calculate an accrued expense (other payable)

2Calculate a prepaid expense (other receivable)

3Calculate income receivable at year-end

4Calculate income received in advance

5Classify each year-end item as accrual / prepayment / receivable / in advance

6State the SOFP line for each year-end adjustment

7Identify the income statement and SOFP effects of each adjustment

8Apply multiple adjustments to calculate the net profit

9Calculate rent receivable income across two periods

Expense recognised in the period

Income recognised in the period

Quick rule for any account

Accrued expense / Accrual / Other payable

Prepaid expense / Prepayment / Other receivable

Income receivable / Other receivable

Income received in advance / Deferred income / Other payable

Matching (accruals) concept

✕Treating the cash paid as the expense for the year.

✕Adding prepayments and subtracting accruals (or vice versa) when adjusting cash to the income statement figure.

✕Calling an accrued expense an 'other receivable' or a prepayment an 'other payable'.

✕Apportioning by months but miscounting the months in the current year.

✕Adjusting cash paid for BOTH the closing prepayment AND not recognising the opening prepayment.

✕Combining 'Other Receivables' with 'Trade Receivables' on the SOFP.

✕Posting a year-end accrual/prepayment journal without a narrative.

Practice questions

Past paper style quiz

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