Hi Matty,

Welcome.

You're not wrong in what you say, but you're too focused on the original transactions that gave rise to the accruals and prepayments. Yes they will expire BUT there'll be new transactions giving rise to the need for new prepayments and accruals to replace the old ones. It's a dynamic thing and maybe the accountants, within materiality bounds, have taken the view that the same level of prepayments and accruals is still appropriate at the respective year ends.

Hope this helps,

Hi Matty,

Think of it like this. If I deplete the old balances with "reversal" postings and establish new balances (in the same amount as the original balances) with new postings, the accounting outcome is identical to just leaving the old balances in place. The question would be "what quantum of accruals/prepayment balances is necessary at the relevant balance sheet date?" If it is very little different to the balances sitting on the nominal ledger you can just leave them be as adequate to reflect the current need for such balances. Again, don't think of the balances established as only applicable to the original point in time. They are often processed by reversal and re-establishment but it is equally valid to process only adjusting increments (i.e. the net of the reversal and re-establishment journals). If the adjusting increment is assessed as zero then there's no need to post a zero journal.

HTH.