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Marsha and the Bear Inc. had several expenses during 2018. They were.,
Electricity 6500
Water 1700
Salaries 180000
It is now 15th February and the accountant has to make some final changes before the financial records of 2018 are closed. She noted,
The audit of 2018 will start in the beginning of March. For the past two years the audit fee has been the same and it is expected to be the same for 2018 also. This has amounted to $5000.
The water expense paid in January 2019 included also December 2018 which amounted to $300.
During the Christmas Holidays, an employee requested an advance against his salary, i.e to receive half of January 2019 salary in December. Amount was $1,500.
Prepare t accounts for water, salaries and audit fees for 2018.
The year end is December, not February. Kindly explain.
Also, Please help explain why audit fees are treated as a payable in the year 2018.
How to account for the water expense, including December, $300?
The audit fees are not treated as having been paid in 2018. However they are an expense for 2018 and are therefore accrued for at the end of the year.
The 300 water expense for December had not been paid at the end of the year and therefore needs accruing.
I do explain all about accruals and the entries needed in my free lectures on accruals and prepayments.
Thank you John. I appreciate your timely response. However, it is still unclear. It is only December’s amount, accrued? The question states the water expense for 2018 is paid for in January 2019, including December’s. Is the amount 1700 a payable? Please help!!
Thank you.
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