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Karen started business on 1 January 2000.During the year to 31 December 2000,She made the following payments for insurance: 5 January 2000 $800 for 6 months to 30 June 2000.15 June $2000 for the 12 months to 30 June 2001.(a) show the extracts from the statement of profit and loss and statement of financial position.(B) write up the T-account for the year to 31 December 2000.Help me with this Sir i have a problem with the accrual and prepayment topic.
We need the cost of insurance for the 12 months from 1 January to 31 December.
The cost of the 6 months to 30 June is 800, so we also need to add in the cost for the 6 months from 1 July to 31 December 2000.
We know that the cost for 12 months from 1 July 2000 to 30 June 2001, so the cost for the 6 months to 31 December is 6/12 x 2,000 = 1,000Therefore the expense in the SOPL for the year is 800 + 1,000 = 1,800
They have paid for the 6 months to 30 June 2001 but this is not an expense of this year and so is a prepayment in the SOFP at 31 December 2000 of 6/12 x 2,000 = 1,000
Have you watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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