- This topic has 17 replies, 7 voices, and was last updated 5 years ago by
.
- Posts
sir, i sometimes come across with the number (w0rd) 20W4, 20W9.. what does this mean
20W5 is the year after 20W4 and so on.
(In the exam they will use proper years e.g. 2015 and 2014)
It could be any way. Can be 2005 or 2015 or 2025. When it’s given like 20W4, 20W5… you need to realise that it’s just one year after the other, like 2004, 2005 or 2014, 2015.(In both it’s ‘W’ and 4 or 5. So it’s just one year after the other.)
If given like 20X4, 20Y5 it means like 2004, 2015. (In this case it’s ‘X’ and ‘Y’. So if I assume X is 0, then Y (which is after X) should be assumed as 1 (which is after 0).
I came across such dates when I did BPP practice kit.
Since John sir mentioned that in exams they will only give proper dates, we need not worry about it at all 🙂
The trainee accountant at Judd Co has forgotten to make an accrual for rent for December in the
financial statements for the year ended 31 December 20X2. Rent is charged in arrears at the end of
February, May, August and November each year. The bill payable in February is expected to be
$30,000. Judd Co’s draft statement of profit or loss shows a profit of $25,000 and draft statement of
financial position shows net assets of $275,000.
What is the profit or loss for the year and what is the net asset position after the accrual has been
included in the financial statements?It says rent is charged in arrears at the end of February, May, August and November.
That means that rent for December, January and February will be charged end of February next year, and the accountant forgot to charge rent for December this year. In other word, December rent for this year is accrued. February bill is expected to be 30,000. So an accrual of 30,000/3 = 10,000 for December should be made.
Accrued expenses increase expense for the year, hence reducing profit for the year and..
Accrued expenses also increase( or create) current liability, reducing net assets.
The double entry will be :
Rent Expense(p&l) – Dr
Rent Accrued(sfp) – CrHence the answer would be:
25,000 – 10,000 = 15,000 profit for the year
275,000 – 10,000 = 265,000 net assets.respected sir,if we receive bill for say quarter 1 and we not paid yet so does the amount still showed as an accrual in SOFP?
If an expense relating to that year is not paid, it should be included in SOFP as a liability.
Can i ask a question please
During 2018, an entity paid a total of 600,000 for rent covering the period from Oct. 1 2017 to March 31, 2019. What figures should appear in the entity’s financial statements for the year ended Dec. 31 2018
600,000 is the payment for a total of 18 months.
Therefore the expense in the SOPL for the 12 months to 31 Dec 2018 is
12/18 x 600,000 = 400,000.At 31 Dec, there is a prepayment on the SOFP for the 3 months from 31 Dec to 31 March 2019 which is therefore 3/18 x 600,000 = 100,000.
Have you watched my free lectures on accruals and prepayments? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
A business compiling it’s financial statement for the year to 31 July each year pays rent quarterly in advance on 1 January,1 April,1 July and October each year.the annual rent was increased from $60,000 per year to $72,000 per year as from 1 October 2013.
What figure should appear for rent expense in business’s statement of profit and loss and other comprehensive income for the year ended 31 July 2014?Why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and explanations!!
The rent cost for the period 1 August 2013 to 30 September 2013 (2 months) is 2/12 x $60,000 = $10,000.
The cost for the period 1 October 2013 to 31 July 2014 (10 months) is 10/12 x $72,000 = $60,000.Therefore the total expense for the year 1 August 2013 to 31 July 2014 is 10,000 + 60,000 = $70,000.
I suggest that you watch my free lectures on accruals and prepayments. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Hi. Please can you explain this question?
At 1 September, the motor expenses account showed 4 months’ insurance prepaid of $80 and fuel costs accrued of $95. During September, the outstanding fuel bill was paid, plus further bills of $245. At 30 September there was a further outstanding fuel bill of $120.
What was the expense included in the statement of profit or loss for motor expenses for September?Please read my answer to the previous question and do not simply type out full questions and expect me to provide an answer.
You must have an answer in the same book in which you found the question and so you should ask about whatever it is in the answer that you are not clear about – then I will explain.At the beginning of September they had prepaid $80 and this was for 4 months insurance. Therefore at the end of September they will still have prepaid for 3 months and so will have still prepaid $60.
Therefore the expense for insurance for September is $20.
For fuel, I think you might have mistyped the question, but as always the expense for the period is the cash paid during the month less the accrual at the start of the month and plus the accrual at the end of the month.
Have you watched my free lectures on accruals and prepayments?
- You must be logged in to reply to this topic.