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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Accruals and Prepayments
I’m sorry for asking so many questions but I suck at Accruals and Prepayments.
Q: The annual insurance premium for S for the period 1 July 2003 to 30 June 2004 is $13,200, which is 10% more than the previous year. Insurance premiums are paid on 1 July.
What is the statement of profit or loss charge for insurance for the year ended 31 December 2003?
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This years insurance is 13,200 and so last year it must have been 100/110 x 13,200 = 12,000
We need the expense for 1 Jan 2003 to 31 Dec 2003.
From 1 Jan to 30 Jun 2003 is 6 months and therefore the expense is 6/12 x 12,000.
From 1 Jul to 30 Dec 2003 is again 6 months and therefore the expense for this period is 6/12 x 13,200.
Add the two together and you have the total expense 🙂