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Reality Ltd Property income

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Reality Ltd Property income

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by JillyB.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
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  • September 4, 2023 at 9:16 pm #691198
    whydoyoucare
    Participant
    • Topics: 50
    • Replies: 46
    • ☆☆

    Reality Itd in business providing property services to landlord. The company also lets out property which it owns itself and during the year ended 31st March 2021 let out properties.
    Property one:
    This is a freehold house that is let out from 1 April 2020 to 31 December 2020 at a monthly rent if £750, payable in advance. On 31 December 2020 the tenant left owing two month rent which really Itd was unable to recover. The property was not re-let before 31 March 2021. During 2021 the company spent £6,800 on repairing the roof of this property. During February and March 2021 €1,100 was spent on advertising for new tenants.
    Property two:
    This is a free hold house that is let out furnished. The property was let out throughout the year ended 31
    March 2021 at a monthly rent of £625, payable in advance. During July 2020 Realty Ltd. spent £430 on replacement furniture. Proceeds from old furniture were 200.
    Property three:
    Swhich is equivalent lost /similan quality
    This is a freehold house that is let out unfurnished. This property was purchased on 1st October 2020 for £180,000 and was empty until 31st December 2020 during this period Realty Ltd spent €3900 en advertising the property. The property was let out from January 2021 to March 2021 at a monthly rent of £800, payable in advance.

    Insurance
    Realty Ltd insured all of its rental properties at a cost of £5,040 for the year ended 31st December 2020 and €5,280 for the year ended 31st December 2021, The insurance is payable annual in advance.

    Required:
    Calculate Realty Ltd’s property business profit for the year ended 31st march 2021

    My question is regarding insurance, can you please tell me how to do it? Our acc year is 1Apr 2020-31 March 2021
    Since we follow cash basis should only 5280 be included as it’s payable annually in advance so would be paid in Jan 2021 so within the year. And 5480 would have been paid in Jan 2020 so outside the acc year. So per cash basis only 5280 be included?

    September 5, 2023 at 5:54 pm #691446
    JillyB
    Keymaster
    • Topics: 0
    • Replies: 899
    • ☆☆☆☆

    The property income would all be added together
    Then deduct all the expense – the insurance would be on an accruals basis

    September 6, 2023 at 11:42 pm #691578
    whydoyoucare
    Participant
    • Topics: 50
    • Replies: 46
    • ☆☆

    But why? We follow cash basis??? Unless clearly stated otherwise

    September 7, 2023 at 9:44 am #691627
    JillyB
    Keymaster
    • Topics: 0
    • Replies: 899
    • ☆☆☆☆

    Ltd Company

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