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At 1 September, the motor expenses account showed 4 months’ insurance prepaid of $80
and fuel costs accrued of $95. During September, the outstanding fuel bill was paid, plus
further bills of $245. At 30 September there was a further outstanding fuel bill of $120.
What was the expense included in the statement of profit or loss for motor expenses for
September?sir kindly explain solution of this question , i watched the lecture and understood but here in expense i am confused in this question, ,
At the beginning of September they had prepaid 4 months insurance. So the expense for September is 1/4 x 80 = $20 (and at the end of September there is 3 months prepaid).
The expense for fuel is the 245 paid plus 120 outstanding = $365
So the total expense is $385.
Because the question says that the outstanding bill (i.e. the accrual) was paid plus further bills of $245. The $245 does not therefore include the $95.
Hello sir.
So if accrual is paid in the outstanding, does not the following reverse entries take place? :
Dr Accrual (95)
Cr Expense (95)So why 95 is not subtracted in the Expense Account ?
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