ABSTRACT
This chapter provides accruals and prepayments, combined rules for accruals and prepayments, credit sales and discounts, bad debts and allowance for doubtful debts and suspense accounts. Final adjustments are entered in the books of a business at the end of the accounting period in order to update or modify account balances. This is done so that the accounts are up to date when the financial statements are prepared. Instead of keeping separate accounts for accruals and prepayments, another approach brings together the expense accounts and the accruals and prepayments under one account. There are costs associated with selling on credit: credit sales are usually good for a business to have because they are claims to someone else’s cash. Accountants label this cost “uncollectible-account expense”, “doubtful-account expense”, or “bad-debt expense”. Cash discount and settlement discount are similar in nature. The object of both is to improve the business’s cash flow by encouraging prompt payment by customers.
