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Troy Co. has Property rental business and received cash totaling $838,600 from tenants during the year ended 31 December 20X6.
Figures for rent in advance and in arrears at the beginning and end of the year were:
31 Dec 20X5 31 Dec 20X6
Rent received in Advance $102,600 $88,700
Rent in arrears (all subsequently received) $42,300 $48,400What amount should appear in Troy Co’s Statement of Profit or Loss for the year ended 31 December 20X6 for rental income?
Rent received in advance is prepaid income. What is “Rent in Arrears” and what is its treatment in SOPL and SOFP and what is the common Journal Entry for this.
Rent in arrears is rent still owing to us from the tenants.
Rent still owing to us at the end of the year increases the income for the year in the SOPL, and appears as a current asset in the SOFP.
The entry at the end of the year is to DR Accrued income CR Rental income receivable
(Although you should not worry too much about the journal entries – there is very little testing of double entries in the exam)Have you watched the free lectures on here? They are a complete course for Paper F3 and cover everything needed to be able to pass the exam well. Obviously you should not be attempting questions in your Exam Kit until you have finished studying – whether you choose to study by watching my free lectures, or by using a Study Text.
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