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Sir,Why are we supposed to record whole amount in SOPL.I mean since the accrual isn’t yet paid why should we show it.Shouldnt we show the actual expense rather than estimated expense
We are required to show the expense for the year (not just the amount of cash actually paid).
For example, for electricity we need to show the cost of the electricity actually used during the year. If we have paid 1,000 for 11 months of the year but have not yet received the bill for the final month we still need to show the cost for the whole year – we have used electricity for 12 months. So we have an accrual for the final month and if we don’t know the exact amount for the final month we have no choice but to estimate what the cost will be.
Do watch my free lectures on this. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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