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At 31 December 2003, Tony had accrued $240 in respect of light and heat for the quarter ending 31 December 2003. In January 2004 he discovered that he had “under-accrued” by $ 10.
The bills for the next four quarters were as follows (q.e. =quarter ended )
Amount………. Relating to……………………. Data paid
$260………….. q.e. 31 March 2004 ………. 15 April 2004
$220…………. q.e. 30 June 2004 ……… 17 July 2004
$210 …………. q.e. 30 September 2004 …………… 14 October 2004
$230…………. q.e. 31 December 2004 …………… 19 January 2005Tony always accrues for expenses based on the last bill.
What is the charge to the statement of the profit and loss in the respect of light and heat for the 15-month period ended 31 March 2005?
I am confused on under accrued. And I have seen your reply which was already asked but didnt understand on that. Please help me.The total of the 4 bills listed is $920. These bills cover the period from 1 January 2004 to 31 December 2004.
We need the expense for the period up to 31 March 2005 and so we need to accrue for the 3 months to 31 March 2005 and will accrue $230 (based on the last bill received).
Last year they should have accrued $10 more then they did, which would have made the expense last year $10 higher. It is too late now to change last years accounts and so we correct it this period and so add $10 to this periods expense.
So the total expense for the 15 months is 920 + 230 + 10 = $1,160.
Have you watched my free lectures on accruals and prepayments?
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