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he electricity account for the year ended 30 June 2013 was:
Opening balance for electricity accrued at 1 July 2012 – 300
Payments Made During The Year:
1 Aug 2012 for 3 months to 31 July 2012 – 600
1 Nov 2012 for 3 months to 31 Oct 2012 – 720
1 Feb 2013 for 3 months t 31 Jan 2013 – 900
30 Jun 2013 for 3 months to 30 Apr 2013 – 840The answer is: Accrued at Jun 2013 – $560
Charge to Sopl at 30 Jun 2013 – $3320Sir I can’t understand how these values are coming. The date breakdown is particularly confusing. Also what to do with the $300
We need the expense for the period 1 July 2012 to 30 June 2012
The total cash paid during the period was 600 + 720 + 900 + 840 = 3,060.
However this includes the amount accrued as owing at the start of the year of 300, so this needs subtracting.
In addition, since the last payment was only up to April 2013, they still owe for May and June and so this needs accruing and adding to the cash to get the expense. Given that the last payment of 840 was for 3 months, the estimate for the amount owing for the remaining 2 months is
2/3 x 840 = 560.Therefore the total expense for the year is 3,060 – 300 + 560 = $3,320.
Have you watched my free lectures on accruals and prepayments? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Thank you sir. I did see the lectures yet this question was troubling me but you explained it easily.
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