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aCCRUALS AND PRE-PAYMENTS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › aCCRUALS AND PRE-PAYMENTS

  • This topic has 2 replies, 2 voices, and was last updated 4 years ago by Kim Smith.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • October 30, 2018 at 6:15 pm #480257
    vavneetb
    Participant
    • Topics: 175
    • Replies: 125
    • ☆☆☆

    A company pays its rent quarterly in advance.A payment of $3000 was made on 28/10/2014 for the period of 31/1/2015.

    What accrual or prepayment should appear on the financial statment of 31/12/2014
    a)1000 prepayment
    b)2000 accural
    c)1000 accrual
    d)2000 prepayment
    Right answer is 1000 prepayment. How?
    I have calculated my answer as follow
    3000 per quarter
    3000*3=9000 per year
    9000/12=750 per month
    750*3 months= 2250.
    which is not in option. as it is said in your lectures only expense of the same year will be recorded in FS of same year.

    Thanks

    October 30, 2018 at 7:27 pm #480265
    Kim Smith
    Keymaster
    • Topics: 100
    • Replies: 6784
    • ☆☆☆☆☆

    Draw a time – a line with marks for the payment date 31-Oct, y/e 31-Dec and the date for which the rent is being paid (up to 31-Jan).

    Payment is in advance so the answer must be a prepayment. 3,000 a quarter is 1,000 a month so Jan is prepaid.

    Regarding your calculation – there are 4, not 3, quarters in a year.

    October 30, 2018 at 7:27 pm #480266
    Kim Smith
    Keymaster
    • Topics: 100
    • Replies: 6784
    • ☆☆☆☆☆

    Draw a time – a line with marks for the payment date 31-Oct, y/e 31-Dec and the date for which the rent is being paid (up to 31-Jan).

    Payment is in advance so the answer must be a prepayment. 3,000 a quarter is 1,000 a month so Jan is prepaid.

    Regarding your calculation – there are 4, not 3, quarters in a year.

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