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Chapter 4 Accruals and Prepayments – Test Q3…

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Chapter 4 Accruals and Prepayments – Test Q3…

  • This topic has 3 replies, 2 voices, and was last updated 11 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • May 27, 2014 at 5:51 pm #171203
    Rob
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Could answer every other question on this test just fine! I seem to have a complete mental block as to why you open or close with the figures shown in the answer, same in question 6. If anyone could just talk it through for me that would be great thanks!
    Rob

    May 27, 2014 at 6:22 pm #171215
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    Examples 3 and 6 are tricky (although they are both the same with different numbers, so if we sort out one, you should be able to do the other one yourself).

    We are receiving rent, and at the end of last year some of the people had already paid us in advance for this years rent (received in advance 68,880). So….at the end of last year we effectively owed them the 68,880 that they had overpaid – so we had a credit balance. We were owing them.
    Also, some people owed us money at the end of last year (rent in arrears 50,880) and so at the end of last year they owed us money and so we had a debit balance – they were owing us.

    (You may find it easier to do it without t-account – t-accounts are not needed for the exam.

    This year we received cash of 1154880.
    However, some of that cash was paying what they owed us from last year – it wasn’t this years income. So subtract 50,880.
    Also though we had already received last year some rent that was income for this year. So add 68,880.

    At the end of this year, people still owed us money for this year. So add 44160.

    Finally, some of the cash we received this year was not income of this year at all – it was for next year. So subtract 74880.

    So….the actual income for this year becomes 1154880 – 50880 + 68880 + 44160 – 74880 = 1142160.

    Do it whichever way you find easier 🙂

    May 27, 2014 at 7:03 pm #171235
    Rob
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Right yes it suddenly seems so clear now! It was the t-account that was throwing me I think. John you’re a legend for doing all of these lectures, can’t thank you enough!

    May 27, 2014 at 8:53 pm #171287
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    You are welcome 🙂

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