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At 1 September, the motor expenses account showed 4 months’ insurance prepaid of $80
and fuel costs accrued of $95. During September, the outstanding fuel bill was paid, plus
further bills of $245. At 30 September, there was a further outstanding fuel bill of $120.What was the expense included in the statement of profit or loss for motor expenses for
September?How to solve this type of question easy way?
There is no special easy way.
It is simply working out the cost of each for September.
Insurance is 1/4 x $80
Fuel is $245 + $120.Have you watched my free lectures on accruals and prepayments?
Hi John,
Thank you for the above answer, I have read the notes and watched your videos on accruals and prepayments. I got the above wrong and hoped you could clarify the below please:
During September, the outstanding fuel bill was paid, plus further bills of $245.
1) I read the 245 as further bills paid? But when paying invoices the double entry doesn’t hit the p/l, so dr trade pay cr bank. It also doesn’t state what months it related to, adding to the confusion. I wonder if the dr for the 245 is the initial entry of the invoice cr trade pay dr p/l and that is what you have taken above with the 120.
I got the 20 for prepayment =) thankfully
2) Also to confirm, that 95 accrual I ignored, usually when I put through accruals they’re reversing journals the next month. Since this accrual was put in but then paid within the same month I assume they reversed this and that’s why the nil impact is ignored here.
Hope that all makes sense
1. If they paid other bills in September then you can only assume that they related to September and therefore the expense is charged in September.
2. Correct.
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