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Hi Mr John…While I was doing questions regarding accruals and prepayments topic I came across strange questions….Such as you explained “accruals and prepayments” from customer point of view, like we pay as a company for expense..And we record prepayments if we pay in advance and so on…..
But how about the vise versa situation which I came across in questions…If we receive accruals and prepayments from a customer…We are company and receive accruals and prepayments maybe from subletting part of our office premises…Here’s one question I can’t solve:::
B, a limited liability company receives rent for subletting part of its premises to a number of tenants….In the year ended 31 December 2014 B received cash of $318600 from its tenants.
Details of rent in advance and arrears at the beginning and end of 2014 are as follows:
31 December
Rent received in advance 28400,rent owing by tenants $18300..(2014)
Rent received in advance $24600,rent owing by tenants 16900..(2013)..
What income of profit and loss of B for 2014?
Can you explain this in elaboration…Thank you…Its exactly the same logic as with expenses.
They received cash of 318,600. However at the start of the year there was 16900 owing to us, so this needs taking out of the 318,600 because that cash is not years income.
Also at the start of the year 24600 had been paid in advance. So that needs adding because it is this years income.So the total so far is 318600 – 16900 + 24600 = 326300
But at the end of the year there had been rent received in advance of 28400 – this needs removing from the cash received for this year. Also there is 18300 still owing so that needs adding because it is this years income.
So the final income for this year is 326300 – 28400 + 18300 = 316200
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