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I appeared in my FA1 CBE on 14th Oct, and completed it with good marks. I came across this question, which i think, is of FA2, incorrectly included in FA1. I wanna know whats the answer.
An A/c is given, name isn’t mentioned, and the following entries are given.
Debit Side Credit Side
b/d 6,000 Income St. 33,500
Bank 15,000
c/d 12,500a) The 33,500 is income
b) The balance 12,500 is an asset
c) The balance 12,500 is a liability
d) The balance 6,000 is a liability.I thought it’s a question from Accruals & Prepayments. And probably an Expense account. Responses appreciated.
It must be an expense account. The other side of the 35,000 credit here is to debit income statement.
15000 would be a CR to cash, representing a payment.
The 6000 b/d on the debit is an asset (prepayment)
The 12500 is carried down to be a credit balance, so is a liability.
Answer =c
@Gromit said:
It must be an expense account. The other side of the 35,000 credit here is to debit income statement.15000 would be a CR to cash, representing a payment.
The 6000 b/d on the debit is an asset (prepayment)
The 12500 is carried down to be a credit balance, so is a liability.
Answer =c
Thanks for the response…
I thought the same, and have answered it as well. Your answer has removed my query…. One last thing, as i’ve said, It should be from FA2, since Accruals & Prepayments are not part of the FA1 syllabus, what do you think sir??The question doesn’t mention the terms ‘accrual’ or ‘prepayment’.
It relies on you recognising that a balance carried down on the credit side must be a liability.
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