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i need help with this question as i’m not getting the logic of years in this question. What is prepayment in this question and for how many months.
A company’s telephone bill consists of two elements. one is quarterly rental charge, payable in advance, the other is a quarterly charge for calls made, payable in arrears.At 1 april 20X9, the previous bill dated 1 march 20X9 had included rental charge of 90. estimated call charges during march were 80.
During the following 12 months bill totalling 2145 were received on 1june,1 september,1 december 20X9 and 1 march 20Y0.eacg containing rental of 90 as well as call charges. estimated call charges for march 20Y0 were 120.
what is the amount to be charged to the statement of profit or loss for the year ended 31 march 20Y0?The rental is paid in advance. Therefore the bill received on 1 March Y0 includes $90 covering the 3 months of March, April and May. Therefore at the 31 March YO they had prepaid for April and May – an amount of 2/3 x $90 = $60.
The calls are paid in arrears, and so the bill received on 1 March covers calls forDecember, January and February. Therefore they also need an accrual for calls in March 20Y0 of $120.
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