Summary reports from Jhappi Co’s general ledger for the year ended 31 March 20X9 are as follows.
Trade receivables general ledger account
Description Dr Description Cr$
Opening balance 32,400
Sales 104,500 Sales returns 8,200
Bank 118,000
Financial position c/fw 10,70
Total 136,900 Total 136,900
Distribution costs general ledger account
Description Dr$ Description Cr$
Opening amount -
Trade payables 3,000
Bank 1,030 Other current assets 460
Profit or loss 3,570
Total 4,030 Total 4,030
Which of the following shows the correct amounts to be presented in the financial statements for the year ended 31 March 20X9?
A. Trade receivables $10,700
Accruals $460
Distribution costs $3,570
B. Trade receivables $10,700
Prepayments $460
Distribution costs $4,030
C.Trade receivables $32,700
Accruals $460
Distribution costs $3,570
D.Trade receivables $10,700
Prepayments $460
Distribution costs $3,570
Ask the Tutor ACCA FA
Help me understand how they got the answer for Prepayment and Accrual?
3y ago#1The 460 is a prepayment.
They have reduced the total expense of 4030 by 460 because the 460 does not relate to this period - it has been prepaid. Also they have referred to it as 'other current assets' and prepayments are current assets. Also, they have credited the Distribution costs account and therefore will have debited 'other current assets' and prepayments are always a debit balance.
Have you watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to pass the exam well.
Thank You for replying
Sir how do i deal with is question which opposite? How do we deal with the other payables/ Accrual. Does it affect anything hence just like the prepayment did.
Summary reports for the month of October 20X3 from Ghaint Co’s general ledger are as follows:
Administrative expenses general ledger account
Description Dr $ Description Cr $
Opening amount 650
Trade payables 6,250
Other payables 150 Profit or loss 7,050
Total 7,050 Total 7,050
Other income general ledger account
Desription Dr $ Description Cr $
Opening amount 3,000
Bank 9,000
Profit or loss 12,000
Total 12,000
Total
12,000
which of the following shows the correct amounts to be presented in the financial statements for the year ended 31 October 20X3?
A. Administrative expenses $7,050
Other income $12,000
Accruals $150
B. Administrative expenses $7,050
Other income $12,000
Accruals $6,250
C. Administrative expenses $6,400
Other income $9,000
Accruals $6,250
D. Administrative expenses $6,400
Other income $9,000
Accruals $150
3y ago#4For accruals there is more owing for the period and therefore we debit the expense account and credit the accruals account.
Have you watched my free lectures because this is all explained in the lectures?
Sign into reply to this topic.