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  2. hello sir,
    i m a bit confused that why don’t we count the days like in example 1 the question says
    5 January 2000 $800 for 6 months to 30 June 2000
    when u started doing the answer you started by writing

    1/jan/2000 —- 30 june 2000 $800

    but the question says that we started from 5 January not 1 January …
    plz explain , becz i saw that we are supposed to count the days as well :/

  6. as a sole trader with stock, how do i account for like my prepaid stock? for example i sell coffee and some of my customers would have paid in advance for packs of my coffee as they use them till their balance finishes. I sometimes cant keep track of the balance of a customer and in a case kept supplying even when their advance payment had been exhausted!

    i just watched the video andi understand if i am the one to make the prepayment but what if its the other way round?

    • You should in future ask this sort of question in the Ask the Tutor Forum, rather than as a comment on a lecture.

      If a customer prepays you would debit cash and credit receivables (and also credit their account in the receivables ledger). As you supply them you then debit receivables (and debit their account in the receivables ledger) and credit sales.

  7. A question:
    On 1 January 2006 the following balances among others were recorded.
    1.Lighting and heating
    2.Insurance
    During the year ended 31st Dec 2006 the information related to these accounts is recorded as follows.
    1.Fire insurance,$960 covering the year ended 31 April 2007 was paid.

    How can I calculate prepayment without knowing the exact date of the payment?
    How do I reflect closing inventory in an expense account?

    • You should ask questions like this in the Ask the Tutor Forum, and not as a comment on a lecture.

      1. The exact date of payment is irrelevant. All that matters is that it was paid during the year ended 31 December (which it obviously was since it had been recorded), and therefore the period after 31 December is prepaid.
      2. Inventory of an expense (such as stationery) is recorded in exactly the same way as inventory of goods. This is dealt with in the lectures on inventory.

  8. i have done the insurance account that would be detailed below.would it be a mistake.
    on the debit side bank $2800 and on the credit side to income statement $1800 and a balance carried forward of $1000.for the next year the balance c/d becomes the bal b/d of $1000 on the debit side and bank $2400 on the credit side to income statement $2200 and a bal c/d of $1200.the it becomes a bal b/d for the next year.

    • No – that would be fine.
      However in the exam you can not be asked to prepare t-accounts, and this question could only be asked in Section A as an MCQ. So all the matters is the final answer – nobody will look at your workings.

    • There could be prepayments for any items of expense. However, it is only really likely to occur on expenses that you have to pay in advance – insurance being the most common, and also rent (although sometimes rent is paid in arrears).
      Any exam questions will make it very clear whether they are being paid in advance or arrears.

  10. :). My english listening skill is still bad….although I can understand all things you’ve done in excercise, but I would like to get through and research that deeply…because F3 is the foundation for doing the next course so…do you mind if you can add and insert the subtitle by English for each lecture video?:) I appreciate that.

  11. hello sir
    i did not understand what you did in question number three. i checked the answer and could not fathom. why are we subtracting opening and closing balance if you could please kindly explain thnk

    • Yes, certainly.

      However the accounts will usually be balanced as soon as the bookkeeper has finished. Then a trial balance will be produced listing the balances. The the adjustments (including accruals and prepayments) will be entered.

      For the exam it does not matter when you take the balance 馃檪

    • Because the have overpaid we credit prepayment to take out the amount of the overpayment, and debit prepayments.
      (What we write against them doesn’t matter, but it is usual to write the name of the other account – you need to watch the previous lecture on double entry to understand this)

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