Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Accrual and Prepayment- FA Chapter 4 Questions
- This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
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- November 4, 2018 at 5:30 pm #483803
Hey,
Can somebody explain the answers for question 5 and 6. I’m not sure how you get to the answer.
November 5, 2018 at 7:56 am #483846For example 5:
They are receiving rent and the cash received during this year was 2,003,040.
However, this cash will include the amount that was owing to them at the start of the year (the rent in arrears) of 11,520. The 11,520 was therefore last years income, not this years, and needs taking out of the cash.
Also, last year they had received rent in advance of 323,040. Although this cash was received last year it is income of this year, and so needs adding to the cash received.At the end of this year, there is rent still owing for this year (rent in arrears) of 20,880 – it is income for this year but the cash has not been received, so this needs adding.
Finally, at the end of this year they had received rent in advance of 345,560. This is included in the cash received this year but is not income for this year (it is next years income) and so this needs removing.
So the actual income for this year is 2,003,040 – 11,520 + 323,040 +20,880 – 346,560 = 1,988,880
The workings for example 6 are the same 🙂
November 5, 2018 at 10:22 pm #483943Thank you, I understand it now.
November 6, 2018 at 6:51 am #483969You are welcome 🙂
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