Okay, I might have missed it, but how should we calculate to reach 1500 in real life if we weren't informed about it? Thank you very much!
J
Jay·
You estimate it, using past records for that exact period e.g. summer vs winter (plus any percentage increases that year due to inflation/price increases seen in the media).
T
Taimoor·
If Actual bill is less than accrual (estimated time) then the difference between actual and estimated will be taken as income this year?
If Actual bill is more than accrual (estimated time) then the difference between actual and estimated will be taken as increased this year?
Kindly confirm.
T
Taimoor·
If bill is less than the estimated, then obviously we have paid more than required and vice versa.
Kindly confirm.
T
Taimoor·
I mean if actual bill is less than estimated then obviously, we have expensed out more last year which should be reversed this year.
L
Leah·
Hi,
Are all the FA lectures and notes up to date for the 2024 syllabus?
I know some things were removed/added in September.
Thanks.
J
John MoffatTutor·
Yes - all of our lectures for all papers are up-to-date for the current syllabuses.
L
Leah·
Thank you for confirming John!
T
The Rock·
I have query about the 950 Cash you have debited under telephone account. I believe this expense was already recorded for previous year telephone expense i.e. 3 months to 31 March 2001 however not paid. This year there should be only reversal for accrual by crediting the cash account for 950. kindly confirm. thanks .!
J
John MoffatTutor·
Although it would end up with the same result, the correct way of dealing with it is as explained in the lecture. Whenever cash is paid the bookkeeper will deal with it in the normal way.
J
Joanne·
Thank you John! You truly are a godsend.?
J
John MoffatTutor·
Thank you for your comment :-)
J
Jing·
The page 24 of FA notes about (b)Accruals:
1.Reverse any Accruals brought forward:
DR Accruals Account
CR Expense Account(e.g. Telephnoe,Electricity)
I want to know,why the CR is not cash?
J
John MoffatTutor·
We credit cash (and debit the expense account) when the cash is actually paid. (Have you watched the whole series of lectures on this topic?)
J
Joanne·
John, this is probably a silly question but how would we deal with an issue where the electricity and water expense is combined and appears as one figure yet we are asked to determine electricity accrued. Do we just simply add it to the amount stated?
Thank you.
C
Chiluba·
Hello sir, great lecture there ?
I wanted to find out on which side of the statement of financial position are accruals and prepayments recorded?
J
John MoffatTutor·
There are no sides :-)
Accruals are shown as current liabilities and prepayments are shown as current assets.
Have you not watched the earlier lectures? They should be watched in chapter order :-)
M
MUHAMMED SHASEEB·
Hello Sir thank you for your lectures, Sir what if there a difference in estimated prepayments and accruals while reversing the entries next accounting period ?
P
PRAVEEN·
With regards to the last part of lecture what if the estimate was out by significant amount and not by £10 or if it has material impact on last year books . What will be the treatment. Please reflect some thought on this, will be quite helpful for practical purpose.
Thanks.
J
John MoffatTutor·
In that case there would be a prior year adjustment, as explained in later lectures. However this would be extremely unlikely since usually the actual amount of the invoice will be known before the accounts are finalised.
P
PRAVEEN·
Thank you John for you instant and clear reply Appreciate it!
J
John MoffatTutor·
You are welcome :-)
R
Richard·
How do we deal with the issue where the actual invoice is different to the accrual estimate? Lets say it was £1000 (rather than 950).
Is the 50 extra accounted for in the current year, and the accruals 950 dealt with as per the lecture?
Many thanks
R
Richard·
Sorry, please ignore. You did cover this-my apologies
J
Joanne·
John, this is probably a silly question but how would we deal with a question that shows an amount for the electricity and water expense combined and we are asked to account for electricity accrued. Do we simply add the accrual?
Thank you.
J
John MoffatTutor·
Without seeing the exact question that I guess you are referring to, from what you have typed the answer is 'yes' you would just add the accrual :-)
A
Abraham·
Sir, since last year (2001) the balance of the telephone expense was 1850 usd in the T account, but this year (2002) you mentioned the balance for the telephone expense from last year is zero when you created the T account for telephone expense. May you explain and thankx in advance for your reply.
A
Abraham·
Sir, i think i have found the answer. We need to "close off the t account". Credit the telephone and debit the statement of profit and loss, thus leave the balance of the telephone "zero".
J
John MoffatTutor·
That is correct :-)
N
Nyasha·
Thanks ?
S
Səddam·
Thanks a lot!!!
J
John MoffatTutor·
You are welcome :-)
A
Anthonia·
Another great lecture! Thanks so much! I wish I had started using these lectures last year; so helpful! Thank you John!
J
John MoffatTutor·
Thank you for your comment :-)
J
John MoffatTutor·
That is correct. If we know the exact amount then we use it. If not then we estimate.
A
Asif·
Hello Sir, in the lectures do you cover Accrual Income and Prepayment Income and their double entry with Income Ledger Accounts, instead of Expense ?
J
John MoffatTutor·
No, because the logic is exactly the same (and, of course, the actual double entries are not needed for the exam).
A
Asif·
It would indeed be a good revision for beginners.
Hope you do consider including it in the future !
S
shakir7385·
Hi Sir,
Thank you for your free lectures. Indeed we all are benefiting from it.
I have one short query regarding the telephone expense of 950 which relates to previous year. Since we already booked this 950 in previous year expense and also created accrual account with the same amount. So in subsequent year, why can't we just Debit the accrual with 950 and credit cash with 950. Why we are required to reverse the accrual.
Best Regards,
Shakir
J
John MoffatTutor·
Although the end result will indeed be the same, it is the accountant who will deal with the year end adjustments including accruals. The bookkeeper records the day-to-day transactions and is taught that when paying electricity we credit cash and debit the expense account.
S
shakir7385·
Thank you John.
J
John MoffatTutor·
You are welcome :-)
K
Kok Hue·
Key concepts i got :
1. Prepayment is the money we paid advance
2. Accruals is the money we haven't paid
3. Everything just remain unchanged if the actual bills is more than the estimation last year ,
because balance of this year act as a auto correction for the last year .
Thanks John .
J
John MoffatTutor·
Thank you for your comment :-)
S
Sephra·
Good day sir,
So i was practicing some questions regarding accruals and prepaymente from Kaplan and i cam accross the question and i dont understand how they got this answer and i was wondering if you can assist me with this.
Question is as follows:
On the first day of month 1, a business had prepaid insurance of $10,000.00. On the first day of month 8, it paid in full, the annual insurance invoice of $36,000.00 to cover the following year.
The amount charged in the statement of profit or loss and the amount shown in the statement of financial positon at the year end is:
The answers given were as follows:
A. $5000 $24000
B. $22,000 $23,000
C. $25,000 $21,000
D. $36,000 $15,000
Any form of help would be greatly appriciated.
J
John MoffatTutor·
Please ask this kind of question in the Ask the Tutor Forum and not as a comment on a lecture.
J
John MoffatTutor·
You can do what you suggest - no problem. The end result is the same and that is all that matters.
Appreciate however that although you must understand double entry for the exam, you cannot be asked to actually write-up any t-accounts.
S
Suraj Nagesh·
Hi sir, in the video @3:50 you said and i quote "i want the expense for this year and the 4500 included. That payment for three months of last year".
I went through the entire lecture video, all 4 parts, understood everything except this one quote.
Could you please go through that part of the video and help me understand what you mean.
Thanks and kind regards.
E
Evelyn·
Hi, thanks for providing these lectures, I'm finding them excellent. The explanations are very clear.
I want to know how accruals and prepayments are treated on an income a/c such as Rental Income from property. There are some questions relating to this in the Kaplan revision kit but I don't see it covered here.
P
Pranjal·
Same way as it is applied for expenses.
Accrual increases balance of account as it relates to current year while prepayments should be deducted as they related to future period.
Only thing since income has credit balance you need to credit income (SOPL)and debit accrued income (will be reflected in SOFP as current asset).
And reverse for prepayments it will be considered as liability in SOFP and rental income will be reduced by debiting it as it income received in advance. Something not related to current year.
J
John MoffatTutor·
Thank you for providing the answer. However please do not do it in general because this area is for comments on the lectures. Students should be encouraged to ask any questions in the Ask the Tutor Forums where they will receive a reply within 24 hours, or in the other Forum for each paper (and please do help people in the non-Ask the Tutor Forum :-) )
P
Pranjal·
As you say, Sir. I won't henceforth. I do agree these questions need to be asked in forum.?
J
John MoffatTutor·
Thanks a lot :-)
S
skhan10·
Hi
So if we under estimated the accruals the difference goes to next years accounts eg £10 expense in your video.
What if it was other way around we estimated too high? The actual bill was £940 instead of out estimate ? Would £10 go in other incomes after gross profit ?
J
John MoffatTutor·
No - it would be treated in exactly the same way but in reverse. It would simply mean that the expense this year would be $10 lower.
D
damulirahenry·
Thanks sir. Do prepayments exist in both the S.O.P.L & S.O.F.P or?
T
Tayyab·
They only exixt in sofp
J
John MoffatTutor·
Correct (although they do need adjusting for to get the total expense in the SOPL)
Y
yao·
Have a good day, sir. I have a question that if the Prepayments or Accruals guessed last year have a terrible deviation from the true number. As you said in the last part of the video, accounts can change the guessed number in the next year to correct the deviation. Is it legal? Thanks for your answer.
Y
yao·
I mean that the deviation maybe contains illegal things....
J
John MoffatTutor·
The treatment is certainly legal. (Why should the deviation contain illegal things - obviously if the company has done something illegal then that is wrong, but is nothing to do with accounting?)
L
lasttride·
Hello,
I am student at University of Surrey.
I am writing in order to express my overwhelming happiness that I found Opentuition.com
It is really a game-changer for me in my studies on Financial Accounting.
John Moffitt truly is a legend! I am watching every lecture with pleasure. He describes everything so understandably and clearly that sometimes I just smile while listening to him.
I wish I had a lecturer like him!
Best regards.
If Actual bill is more than accrual (estimated time) then the difference between actual and estimated will be taken as increased this year?
Kindly confirm.
Kindly confirm.
Are all the FA lectures and notes up to date for the 2024 syllabus?
I know some things were removed/added in September.
Thanks.
1.Reverse any Accruals brought forward:
DR Accruals Account
CR Expense Account(e.g. Telephnoe,Electricity)
I want to know,why the CR is not cash?
Thank you.
I wanted to find out on which side of the statement of financial position are accruals and prepayments recorded?
Accruals are shown as current liabilities and prepayments are shown as current assets.
Have you not watched the earlier lectures? They should be watched in chapter order :-)
Thanks.
Is the 50 extra accounted for in the current year, and the accruals 950 dealt with as per the lecture?
Many thanks
Thank you.
Hope you do consider including it in the future !
Thank you for your free lectures. Indeed we all are benefiting from it.
I have one short query regarding the telephone expense of 950 which relates to previous year. Since we already booked this 950 in previous year expense and also created accrual account with the same amount. So in subsequent year, why can't we just Debit the accrual with 950 and credit cash with 950. Why we are required to reverse the accrual.
Best Regards,
Shakir
1. Prepayment is the money we paid advance
2. Accruals is the money we haven't paid
3. Everything just remain unchanged if the actual bills is more than the estimation last year ,
because balance of this year act as a auto correction for the last year .
Thanks John .
So i was practicing some questions regarding accruals and prepaymente from Kaplan and i cam accross the question and i dont understand how they got this answer and i was wondering if you can assist me with this.
Question is as follows:
On the first day of month 1, a business had prepaid insurance of $10,000.00. On the first day of month 8, it paid in full, the annual insurance invoice of $36,000.00 to cover the following year.
The amount charged in the statement of profit or loss and the amount shown in the statement of financial positon at the year end is:
The answers given were as follows:
A. $5000 $24000
B. $22,000 $23,000
C. $25,000 $21,000
D. $36,000 $15,000
Any form of help would be greatly appriciated.
Appreciate however that although you must understand double entry for the exam, you cannot be asked to actually write-up any t-accounts.
I went through the entire lecture video, all 4 parts, understood everything except this one quote.
Could you please go through that part of the video and help me understand what you mean.
Thanks and kind regards.
I want to know how accruals and prepayments are treated on an income a/c such as Rental Income from property. There are some questions relating to this in the Kaplan revision kit but I don't see it covered here.
Accrual increases balance of account as it relates to current year while prepayments should be deducted as they related to future period.
Only thing since income has credit balance you need to credit income (SOPL)and debit accrued income (will be reflected in SOFP as current asset).
And reverse for prepayments it will be considered as liability in SOFP and rental income will be reduced by debiting it as it income received in advance. Something not related to current year.
So if we under estimated the accruals the difference goes to next years accounts eg £10 expense in your video.
What if it was other way around we estimated too high? The actual bill was £940 instead of out estimate ? Would £10 go in other incomes after gross profit ?
I am student at University of Surrey.
I am writing in order to express my overwhelming happiness that I found Opentuition.com
It is really a game-changer for me in my studies on Financial Accounting.
John Moffitt truly is a legend! I am watching every lecture with pleasure. He describes everything so understandably and clearly that sometimes I just smile while listening to him.
I wish I had a lecturer like him!
Best regards.