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I keep getting muddled up with the wording on these questions. I am ok with understanding accruals are for goods/services received and not yet paid and that prepayments are for goods/services paid for but not yet received. I am also ok with apportioning but I often get it wrong with the wording and pick the wrong one.
For question below I put prepayment when it was accrual.
Trial Balance had Dr £2650 in Utilities
Question 1
The trial balance on the attached schedule has been prepared for Red Ltd for the year ended 30 September 2019. The following additional information is available:
5. A Utility bill for £480 relating to electricity used for the period 19 August to 14 October 2019 has arrived since the year end.
The reason i put prepayments is I felt as if of the £2650 had been electricity expense to year end and the portion from 30th September 2019 to 14th October was then prepaid.
Obviously I know it’s wrong but just wondering on wording to look out for so it’s easy to identify which is which?
If you want me to answer, then in future ask in the Ask the Tutor Forum. This forum is for students to help each other.
The note says that the bill has arrived since the year end. Therefore at the year end it will not have been entered in the accounts and therefore will not be part of the figure on the trial balance. Given that part of the bill relates to before the year end there needs to be an accrual.
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