The following transactions relate to Rashid’s electricity expense ledger account for the year ended 30 June 20X9: Prepayment brought Forward 550 Cash paid 5,400 Accrual carried Forward 650 What amount should be charged to the statement of profit or loss in the year ended 30 June 20X9 for electricity?
I would say that it is only the cash and the accrual but the correct answer is that we must add the prepayment as well. Normally we debit prepayment and credit expense. Or is it because the prepayment is brought forward and in order to close the account we must credit prepayment and debit expense? Thank you for your help!