Are prepaid legal services worth the cost

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According to accounting regulations, expenses and income are to be booked in the period in which they are incurred and to be shown in the annual financial statements in the appropriate period. In order to achieve the correct period, there is the possibility of accruals and deferrals. In the technical language, the accruals and deferrals are called transitory assets (income) and transitory liabilities (expenses).

Active accruals and deferrals (TA)

Active accruals and deferrals (also called transitory assets) are accruals ...

  • ... understood as income for which no payment has been received at the time the annual financial statements are prepared, but which clearly relates to the old year.
  • ... understood from expenses that were booked in the old year but belong in the new annual accounts. The consumption of value in the old year is reversed because the expenditure is only "used up" in the new year.

Examples: newspaper subscription, insurance contributions

In this case we ask you to fill out the form "Accrual document (transitory active postings)" to be filled in and submitted on time according to the annual financial statement information.

Posting: active accruals = transitory assets

  1. prepaid expenses
    Booking: TA - effort
  2. Income not yet received
    Posting: TA - yield

Accruals and deferrals (TP)

Accruals and deferrals are defined under passive accruals (also called transitory liabilities) ...

  • ... understood to mean expenses for which no invoice (vendor / supplier) is available at the time the annual financial statements are prepared. Often one can only estimate the value of the missing invoices. For this work, we recommend looking through the order, a delivery note or, as a guide, the vendor invoices posted from the previous year. The budget should also be adhered to in the case of any deferred income.
  • ... understood of the income that belongs in the new annual accounts. Since the service for this income will only be provided in the new year, the amount must be "released" in the old year with deferred income.

Example rental income

In this case we ask you to fill out the form "Accrual document (transitory active postings)" to be filled in and submitted on time according to the annual financial statement information.

Posting: accruals and deferrals = transitory liabilities

  1. effort not yet paid
    Booking: effort - TP
     
  2. income received in advance
    Posting: Income - TP

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    Head of Accounting

    description
    Eva Kramer University of BaselFinance & ControllingAccounting Steingraben 5, PO Box
    4001 Basel
    SwitzerlandworkTel. + 41 (0) 61 207 08 63workfaxFax + 41 (0) 61 207 13 34Send email
    Contact information s Contact information s
  • person

    Head of Cash Management

    description
    PeterXander University of BaselFinance & ControllingCash ManagementSteinengraben 5, PO Box
    4001 Basel
    SwitzerlandworkTel. + 41 61 207 12 28workfaxFax + 41 61 207 13 34Send email
    Contact information s Contact information s
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