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Please solve this calculations clearer to me.
Hello Sir,
Please i have the following questions on prepayment
and accrual.
Qst. 1
In February 2013 a company paid an electricity billof $450 for the three months to 31/1/2013.
In March 2014, the company paid an electricity billof $600 for the three months to 31/1/2014.
Bills were also paid in may, August and November2013 amounting to $2000 for electricity from
1/2/2013 to 31/10/2013.
What electricity expenses should be shown in theincome statement for the year ended 31/12/2013 and
what is the accrual or prepayment as at 31/12/2013?
450 x 1/3 = relevant to Jan 2013 = 150
600 x 2/3 = relevant to Dec and Nov 2014 = 400 (tihis would be an accrual at 31/12/2013 as owed then)
All the 2,000 relates to 2013
Expense for 2014 = 150 + 2000 + 400 = 2,550.
Thank you sir but the question demands Electricity expense for 31/12/2013 that will appear in the income statement and not for 2014.
Sorry, my slip, meant to say 2013:
Expense for 2013 = 150 + 2000 + 400 = 2,550
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