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FAAccruals & Prepayment

ASACCA Student5y ago
Sir, I've no problem with the calculation but my question is why our answer is not "Prepayment of $1090" ? As Dave is paying in advance for 3 months? So, at the year end 1 month is still pre-paid. Dave Hull is preparing his final accounts for the year to 30 April 20X6. The last payment Dave made for electricity was in March 20X6 when he paid $3,270 for the three months to 28 February 20X6. What adjustment does Dave need to make when preparing his final accounts for the year to 30 April 20X6? A A prepayment of $1,090 B An accrual of $1,090 C A prepayment of $2,180 D An accrual of $2,180
SSukaina5y ago#1
Hi ather hope ur good, was going through and saw your question. - So if u notice the year ends on 30th April 20x6. - his last payment was on march for 3 MONTHS TO: to 28th February 20x6. - Now this statement means he paid electricity bill for December, January and February. - This is because electricity bills are usually paid after the electricity is used then a bill is sent after the electricity is already used to have accurate charges to the customer. - so don't confuse yourself thinking the bill paid in march was for march, April and May. NO! - The payment was for 3 month to 28th February. this means that on march he paid his bill due from December 20X5 to February 20x6 to complete his 3 month bill. - This means that at the end of April 20x6, he has not yet paid for march and April. - therefore the charge per month is calculated as being the same as the charge per month for the previous three months. - $3270 divide by 3. - makes $1090 per month. - hence accruals for the 2 months march and April will be $1090 times 2 - giving $2180 accruals at the year end.
ASACCA Student5y ago#2
My bad sir, Sorry took a lot of time of yours. I misunderstood the question. Really appreciate for the support sir.
MmrjonbainModerator5y ago#3
ather, if you want to ask the tutor something directly, please use the ask the tutor forum- https://opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-fa/ This forum is primarily designed for students to help one another. Hope this helps.
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