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Hi! Above is the link to example 4 in page 7 of the BPP learning media interactive text.
What Ihave not been able to understand is why is the prepayment being calculated from March 2017 onwards. Is the insurance prepayment made in June in the question being paid for the entire next year between march 2017-February 2018. i did not understand why the year as split up the way it to calculate the insurance cost for that given accounting year.Thanks
The question says that the firm’s accounting year is 1 March 20X7 to 28 February 20X8.
The insurance payments are both for years from 1 June to the following 31 May.
So from 1 March X7 to 31 May X7 (which is 3 months) is part of the first insurance payment.
From 1 June X7 to 28 February X8 (which is the remaining 9 months of their accounting year) is part of the second insurance payment.Have you watched my free lectures on accruals and prepayments? The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well. If you are watching the lectures then you do not really need a Study Text. Far more important is that you have a Revision Kit. The Revision Kit contains lots of exam standard questions for practice, and practice is vital to passing the exam.
(PS Please don’t post links to copies of copyright material – it is illegal for us to host copyright material (just as it is illegal and unethical for others to share or download soft copies) 🙂 )
I see, thank you for the explanation.
I haven’t watched the lectures for accruals and prepayments as of yet due to poor internet connection for the time being, but I will once the issue is fixed.
Thanks for your help once again.
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