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Hello sir,
This question is quite challenging for me. We are given both bills paid and bills received.
What should one focus for while calculating the expense ? And also in the T table ? Bills paid or Bills received ?
How do we reach the correct charge ?
I know that we pay $600 per month automatically, totaling $7200.
$200 was paid excess last year, so we add it to the expense this year (Reverse prepayment).
And that all the bills received add up to $6800.
Sir…I think I figured it out.
Under Gas expense A/C
Dr 200 (Reverse Prepayment)
Dr 7200 (Cash)
Total : 7400Cr 600 (Prepayment)
C/d 6800
Total: 7400Bal b/d : 6800
Cr 6800 to close account
Dr 6800 SOPLWhat do you say ?
I just have a query. In questions like these we should just ignore the prepaid amount of $200 and add the invoices to get the expense for the period then? Because initially I added the $200 to the $6800 to get the amount to be posted to the P&L account.
Every question is different and it depends on the exact wording.
We need to cost of the gas used during the year, and in this question we know the total charged – the total of the four invoices.
The prepayment and the cash paid during the year do not affect the expense for the year. The only affect the amount overpaid at the end of the year, which is not needed for this question/.
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