Accrual vs Provision vs Prepayment – What's the Difference? | Accounting Made Simple

Accrual vs Provision vs Prepayment — what's the difference? These three concepts are extremely common in month-end closing, financial reporting and accounting interviews, but they are often confused with each other. In this video, I explain all three in a simple and practical way using real-world corporate examples and journal entries. In this video, you'll understand: 🔹 Accruals – Expense incurred now, invoice/payment later 🔹 Prepayments – Payment made now, expense/benefit received later 🔹 Provisions – Present obligation exists, but amount or timing involves uncertainty 🔹 How to decide between an accrual, provision and prepayment 🔹 Practical month-end closing examples 🔹 Journal entries for each concept 🔹 A common accounting interview question/trap 📌 Quick Memory Trick Accrual: Expense first → Invoice later Prepayment: Payment first → Expense later Provision: Liability exists → Amount/timing uncertain If you're working in Finance, Accounting, Record to Report, Financial Reporting or Month-End Close, these are concepts you should be comfortable with. 💬 Comment below: Which one do you find the most confusing — Accrual, Provision or Prepayment? 👍 Like the video if it helped 🔔 Subscribe for more simple explanations of Accounting, IAS, IFRS and practical Finance concepts. Accounting Made Simple | Tanuj Talwar, ACCA #Accounting #Accruals #Provision #Prepayment #Finance #IFRS #AccountingInterview #MonthEndClose #ACCA #FinancialReporting