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Hello, Can someone please help me
I understand: e.g
If, we pay 4 months of gas £100 but our statement is one month we do a pre payment:So DR Prepayment Asset acc for £75
CR Gas £75Correct?
And if the estimated telephone bill was for £40
we doDR: Telephone £40
CR £40 Accrual accBUTTTTTT
What is the DR and CR when we
: ACCRUE/ FUTURE Income ( e..g we suppose to get paid £1000 INCOME)
AND whats DR and CR for Prepaymetn IF someone PAYS US rental income of £1000 for the year
I get really confused on this 🙁
Please help
Thank You very much!! 🙂
In general, no provision for the future income as per IAS 37.
Your example mentioned that we will receive money ,no pay money ,so it will be Accruals no Prepayment when the money cover more than one year
When some one paid for us $1000 for 4 years as rental payment and we need to make revenue recognition IAS 18 for this service in the statements as follows :
SOPL
DR Rental Exp. 250
CR Rental Income 250the remaining income will treated as Accruals in SOFP
NCL
Rental accrual 500
CL
Rental accrual 250Finally , the estimated bill phone well be treated as provision in SOFP , and will be compared and adjusted with the actual amount latter.
wrageh: I think maybe you misunderstood the question, because your answer is not correct – it would be wrong to Dr rent expense and Cr rent income – that would make no sense.
Please do not answer questions in this forum because it is ‘Ask the ACCA Tutor Forum’ and you are not the tutor. Instead, please answer questions in the general F3 forum.
Mark: Although I think I know what you are asking, we are not talking about future income.
If you receive rent during the year, the Dr Cash; Cr Rental income.
If the tenant has not paid this years rent in fall (i.e. still owes us money), then we Dr Accrued income; Cr Rental Income.
The rental income will show the full income for the year and will appear in the Statement of profit or loss.
The Accrued income will appear as a current asset in the Statement of financial position.If, alternatively, the tenant has paid us too much this year (because they have paid some of next years rent in advance, then we Dr Rental income and Cr Prepaid income.
Again, the rental income account will then show the correct rent earned this year.
The prepaid income will appear as a current liability in the Statement of financial position. (a liability because at the end of the year they have overpaid us and so effectively at the end of the year we are owing it back to them. (Obviously we will not pay it back to them – they just will not pay again this year))
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