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Hello Mr John,
Could you explain this, please?
On 9 October, Parker paid his heat and power bill for the three months ended 30 September 20X4. The bill included a meter rental charge of $60 for the three months ending 31 December 20X4 and a usage charge of $135 for the three month period to 30 September 20X4. Parker has an accounting year end date of 31 October 20X4.
answer: Prepayment 40 accrual 45
Usage charge is 135$ up to September. So, we need to make payment for October for which we should calculate the amount of an accrual. I understood till this part. However, they didn’t provide the bill amount for the following quarter. The book takes the the usage bill of previous quarter (135$) and calculating the amount for the October.
if I have this kind of question, do I need to take the previous month bill?
thank you in advance!
Yes. As I explain in my lectures it is very normal in practice not to know the exact amount owing because the bill has not yet been received. If that happens then we have to estimate the amount owing and (unless the question says to do different) then we estimate it by looking at the previous bill.
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