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Could you give the explanation by T-account for me to understand this question:
The year end of M Inc is 30 November 20X0. The company pays for its gas by a standing order of $600 per month. On 1 December 20W9, the statement from the gas supplier showed that M Inc had overpaid by $200. M, Inc received gas bill for the four quarters commencing on 1 December 20W9 and ending on 30 November 20X0 for $1,300, $1,400, $2,100 and $2,000 respectively.
Which of the following is the correct charge for gas in M Inc’s statement of profit or loss for the year ended 30 November 20X0?
My solution is that we know the pays have to pay to supplier each month is totally 600×12 = 7,200. Besides, we known that we overpaid $200 in previous year. So, the expense of M. Inc charge to the year end of 30 November is 7.200-200 = 7,000. But this is a wrong answer…where I made mistakes?
I am not going to prepare a t-account – it is not possible to type it here and you could never be asked to prepare one in the exam (and to do so would be wasting time).
The expense in the SOPL is the total gas used during the period. How much cash has been paid is of no relevance – that is only relevant when determine the amount of the accrual or prepayment that will appear in the SOPL at the end of the year.
The total expense for the year is simply the total of the four bills that have beeb received.
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