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The year end of Lansdown is 31 December. The entity pays for its electricity by a standing order of $100 per month. On 1 January 20X5 the statement from the electricity supplier showed that Lansdown had overpaid by $25. Lansdown received electricity bills for the four quarters starting on 1 January 20X5 and ending on 31 December 20X5 for $350, $375, $275 and $300 respectively. What should be the correct entries for electricity in Lansdown’s statement of profit or loss and statement of financial position for the year ended 31 December 20X5?
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Statement of profit or loss
Statement of financial position Accrual/prepaymentSource: Kaplan Study Book
– In the answer, as for SoFP part, an accrual of $75 is shown. Could you please explain this?
At the start of the year they had overpaid by 25 and during the year paid another 12 x 100 = 1,200. So a total of 1,225.
The total expense for the year comes to 350 + 375 + 275 + 300 = 1,300
Therefore at the end of the year they are still owing 1,300 – 1,225 = $75
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