accrual and prepayment

Surely your Kaplan Kit has an answer together with workings? :-) For property 1, they had a credit balance at the start of the year, and so they had received 12,300 last year in advance - it is income of this year. At the end of the year they have a debit balance, and so they are still owed 13,400 for this years rent. So the total income for this year is 280,000 + 12,300 + 13,400 = 305.700 For property 2, they had a debit balance at the start of the year, so they were owed 5,400 from last year, which means that the 160,000 cash received includes 5,400 which is last years income. At the end of the year they have a credit balance, and so the tenant has overpaid rent this year (they have paid some rent for next year) and so the 160,000 cash received includes 6,700 which is next years income - not this years income. So the total income for this year is 160,000 - 5,400 - 6,700 = 147,900

The Umbrella Shop has the following trial balance as at 30 September 20X8. $ $ Sales 156,000 Purchases 65,000 Land and buildings – carrying value at 30.9.X8 125,000 Plant and machinery – carrying value at 30.9.X8 75,000 Inventory at 1.10.X7 10,000 Cash at bank 12,000 Trade accounts receivable 54,000 Trade accounts payable 40,000 Selling expenses 10,000 Cash in hand 2,000 Administration expenses 15,000 Finance expenses 5,000 Carriage inwards 1,000 Carriage outwards 2,000 Capital account at 1.10.X7 180,000 376,000 376,000 The following information is available. (a) Closing inventory at 30.9.X8 is $13,000, after writing off damaged goods of $2,000. (b) Included in administration expenses is machinery rental of $6,000 covering the year to 31 December 20X8. (c) A late invoice for $12,000 covering rent for the year ended 30 June 20X9 has not been included in the trial balance. Prepare a statement of profit or loss and statement of financial position for the year ended 30 September 20X8. ANSWER THE UMBRELLA SHOP STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 SEPTEMBER 20X8 $ $ Revenue 156,000 Opening inventory 10,000 Purchases 65,000 Carriage inwards 1,000 76,000 Closing inventory (W1) 13,000 Cost of goods sold 63,000 Gross profit 93,000 Selling expenses 10,000 Carriage outwards 2,000 Administration expenses (W2) 16,500 Finance expenses 5,000 33,500 Profit for the year 59,500 WORKINGS 1 Closing inventory As the figure of $13,000 is after writing off damaged goods, no further adjustments are necessary. Remember that you are effectively crediting closing inventory to the statement of profit or loss and the corresponding debit is to the statement of financial position. 2 Administration expenses $ Per trial balance 15,000 Add accrual (W3) 3,000 18,000 Less prepayment (W4) (1,500) 16,500 3 Accrual $ Rent for year to 30 June 20X9 12,000 Accrual for period to 30 September 20X8 (3 /12 ? $12,000) 3,000 4 Prepayment $ Machinery rental for the year to 31 December 20X8 6,000 Prepayment for period 1 October to 31 December 20X8 (3 /12 ? $6,000) 1,500 I cannot understand this part of answer: 3 Accrual $ Rent for year to 30 June 20X9 12,000 Accrual for period to 30 September 20X8 (3 /12 ? $12,000) 3,000 Why we do not calculate only accrual?why we dont calculate prepayment? Thank you in advance

But they have calculated the prepayment. It is 3/12 of the administration expenses of 6,000

But in (c) there is late invoice for $12000 (covering year ended 30 June 2009),which is not included in the trial balance. The year is ended in 30 September 2008 ,therefore there is prepayment 12000/12×9=9000. Is it correct?

No, that is not correct. Given that the invoice has not been entered or paid, there is no pre-payment. They owe for the 3 months to September and there is therefore an accrual of 3/12 x 12,000 = 3,000 as stated in the answer.