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Hello John, Thanks for the lectures.
What is the reasoning behind the calculation for the current year SOPL balances in questions 5 and 6 of the Chapter 4 practice questions showing rent in advance and rent in arrears?
We know the cash received during the year, but we need the income actually earned during the year (just as for expenses we need the actual expenditure incurred during the year and not the actual cash paid).
So if we have received rent in advance, then although it will be included in the cash received during the year it is not income earned during the year. Similarly if there is rent in arrears (i.e. not yet received) then it is income earned during the year even though the cash has not actually been received).
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