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Buster’s draft financial statements for the year to 31 October 20X5 report a loss of $1486. When he prepared the financial statements, Buster did not include an accrual of $1625 and a prepayment of $834.
What is Buster’s profit or loss for the year following the inclusion of the accrual and prepayment?Answer given in the text book was $2277
Sir, can you explain me how?
and sir, its just given accrual and prepayments, not given whether its accrued expense or income and whether it is prepaid expense or income. How to recognize that?An accrual or prepayment always relates to an expense, unless the question specifically says differently.
The accrual therefore means an extra expense, which will reduce the profit. A prepayment reduces the expense, which means more profit.
So the correct profit is -1486 – 1625 + 834 = -2277 (which, because it is negative, means a loss of 2,277)
hello Sir,can you please help me with this problem! the answer for the question bellow was $255 but i got $115 🙁
Bob starts the year with $45 of prepaid insurance. He renews his annual insurance policy on 1.10.x4 at a cost of $280. What is the expense for insurance in the year to 31.12.x4?
If you are sure you have copied the whole of the question correctly, then the answer is indeed $115 and there is a mistake in your book.
(255 would only be correct if the question said that the policy costing 280 covered a year starting on 01.04.X4, or if instead it asked for the expense for the year ending 30 June X5.
Thank you so much Mr Moffat:).. God bless you.Keep up the good work and thank you again for your quick reply
Hi, Mr.John.
My question from Dec.2011 Exams.ch.4. Accr.and Prepaym. Qs.1.
I don’t understand why you didn’t add to current.assets the amount 7200 $ of the insuarance prepaid?1)on 1 jan.2008 the company made a loan of 28 800 to an employee, repayable 1 jan.2009 charging interest 2 % per year. On the due date she paid whole am.of loan and interest.
2) company paid insuarance 21 600 $ in 2008 covering the year ending 31 Avg. 2009.
3) On 1 Jan 2009 the company received rent from a tenant 9600$ covering six months
to 31 Dec.2008
For these items what total figures should be incleded in the Statement of Financial Position at 31 Dec 2008 ?The insurance prepaid is added, but it is not 7,200.
Since the year end is 31 December, and the insurance was paid up to 31 August, the amount of the prepayment is for the 8 months to August and is therefore 8/12 x 21,600 (which is 14,400, not 7,200).
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Hello my question is
Details of a company’s insurance policy are shown as below:
Premium for the year ended 31 March 2008 paid April 2007 $25,920
Premium for the year ended 31 March 2009 paid April 2008 $28,800What figures should be included in the company’s financial statements for the year ended 30 June 2008
Thank you very much sir !
But i dont understand only this question.
Explain all the Current assets and C.Liabilities includings for the year ending 31 december 2008. Please Help.gowtam0312:
Please do not simply set test questions and expect an answer. You must have an answer in the same book in which you found the question (if not you are using the wrong book and are wasting your time – you should use a Revision Kit from one of the ACCA approved publisher). You should use this forum to ask about which bit of the printed answer you do not understand – then I will try to help you.
From 1 July 2007 to 31 March 2008 is 9 months and therefore the expense is 9/12 x 25920 = 19440
From 1 April 2008 to 30 June 2008 is 3 months and therefore the expense is 3/12 x 28800 = 7200So the total expense for the year to 30 June 2008 is 19440 + 7200 = 26640
Have you watched my free lectures on this? The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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