This module is about matching: making sure each expense and each item of income is placed in the financial year it belongs to, not the year in which cash happened to move. It covers accrued expenses, prepaid expenses, income received in advance, and the effect of each on the income statement and the statement of financial position. Check the current Cambridge IGCSE Accounting 0452 syllabus page for the exact content points in your exam year.
What should you already know?
You need double entry and ledger balancing from double-entry foundations, including how a ledger account is closed off with a balance carried down. You should also know the difference between capital and revenue items from capital and revenue treatment. If you can balance an expense account and transfer it to the income statement, you are ready.
An orienting example
Bengkel Sinar is a small workshop with a year end of 31 December 2025. Its cash book shows RM 6,000 paid for rent and RM 2,000 paid for electricity during the year. Two facts are missing from the cash book.
The rent payment includes RM 1,000 for January 2026, and an electricity bill of RM 300 for December arrived in January.
Step 1, rent: only the part that belongs to 2025 is a 2025 expense. 6,000 − 1,000 = RM 5,000. The RM 1,000 is a prepayment, an asset at the year end.
Step 2, electricity: the December electricity was used in 2025, so it is a 2025 expense even though nobody has paid for it yet. 2,000 + 300 = RM 2,300. The RM 300 is an accrual, a liability at the year end.
Step 3, total cost: the two expenses are 5,000 + 2,300 = RM 7,300, although cash paid was only 6,000 + 2,000 = RM 8,000. The difference of RM 700 is the prepayment (RM 1,000) less the accrual (RM 300).
The thread through every lesson is the same: the cash paid is only the starting figure, and the expense is what remains after you correct it for the period.
In what order should you study the lessons?
- Allocate an expense to the correct period: start here, because the matching idea behind every adjustment is built in this lesson.
- Calculate a prepaid amount from dates: turns a payment date and a cover period into a prepayment figure.
- Treat income received in advance: the same logic applied to money you receive, which flips the direction.
- Adjust a statement after an accrual: shows how profit and the statement of financial position change together.
- Separate cash paid from expense recognised: the full ledger method, with opening and closing balances on both sides.
After these, try the accruals and prepayments practice set. The double-entry and ledger trainer lets you test where each entry lands, and the percentage-base explorer is useful when you want to check a part of a year as a share of the whole.
What are the common traps?
- Using cash paid as the expense. The cash book figure is a starting point. The expense is the amount that belongs to the year.
- Counting months wrongly. From 1 October to 31 December is 3 months, not 4. List the months if you are unsure.
- Adding a prepayment to the expense. A prepayment reduces this year’s expense because part of the payment belongs to next year.
- Forgetting the opening balances. An accrual or prepayment from last year changes this year’s expense when the ledger is rolled forward.
- Showing an accrual as an asset. An accrual is owed, so it is a current liability. A prepayment is a current asset.
How should you use the practice set?
Rule the ledger account on paper, work out each adjustment from the dates, then open the worked answer. Compare every line, not only the final profit, because two errors can cancel and leave the right total for the wrong reason.
If the same mistake keeps coming back, log it in the mistake log and retest queue and try a fresh question a few days later. Students who want someone to watch their reasoning as they work can consider online one-to-one Accounting tuition, where an assigned teacher can follow each entry as it is made.