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Hello sir,
Here is the question i have problem in solving.
Question: At 1 September, the motor expenses account showed 4 month’s insurance prepaid of $80 and fuel costs accrued of $95. During September, the outstanding fuel bill was paid, plus further bills of $245. At 30 September there was a further outstanding fuel bill of $120.
What was the expense included in the statement of profit and loss for motor expenses for September?
Solution:
The debit entries in motor expense account are:
Balance b/f (insurance) =80
Cash paid. =95+245
Balance c/f(petrol) = 120
Credit entries:
Balance b/f ( fuel) = 95
STATEMENT OF PROFIT OR LOSS(B) = 385
Balance c/f (insurance). = 60Sir, in the solution, how do we get Balance c/f (petrol) 120
Balance c/f (insurance). 60For the fuel (petrol), the question says that there is an outstanding bill of $120.
For the insurance, they had prepaid $80 at the start of the month and this was for 4 months (so $20 per month).
At the end of the month they will only then have prepaid for 3 months, so the prepayment is 3 x $20 = $60.
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