Chapter 11 Prepayments and Accruals Mix

Chapter 11 Prepayments and Accruals
11.3 Prepayments & Accruals (Mix)

Question 1
(a)
Date
2013
Jan 1
May 24
Sep 9
Dec 31
Utilities Expense Account

Particulars
Dr (+)
$
Accrued Utilities Expense

Cash at Bank
Cash at Bank
Profit and Loss
Cr (-) Balance
$
400
400 Cr
520
680
1 170
370
Insurance Expense Account

Date
2013
Jan 1
Apr 1
Dec 31
Dec 31
Particulars
Prepaid Insurance Expense
Cash at Bank
Profit and Loss
(2 400 12 x 3)
Dr (+)
$
200
2 400
Cr (-)
$
Balance
200 Cr
2 000
600
Rent Income Account

Date
2013
Jan 1
Jun 15
Dec 15
Dec 31
Dec 31
(b)
Add:
Less:
Particulars
Rent Income Receivable
Cash at Bank
Cash at Bank
Profit and Loss
Rent Income Received in Advance
Dr (-)
$
300
Cr (+)
$
1 500
1 500
2 200
500
Balance
300
1 200
2 700
500
0
Income Statement for the year ended 31 December 2013 (extract)

Other Income
$
$
Rent Income
2 200
Expenses
Utilities Expense
Insurance Expense
(1 170)
(2 000)
(c)
Balance Sheet as at 31 December 2013 (extract)
$
Current Assets
600
Current Liabilities
370
500
Dr
Cr
Cr
Cr

Question 2
(a)
Date
2014
Jan 1
Dec 31
Dec 31
Dec 31
Particulars
Cash at Bank
Profit and Loss
Dr (+)
Cr (-)
$
5 800
36 300
35 000
7 100
Balance
5 800 Dr
42 100 Dr
7 100 Dr
0
Rent Income Account

Date
2014
Jan 1
Dec 31
Dec 31
Dec 31
Particulars
Rent Income Receivable
Cash at Bank
Profit and Loss
(10 000 x 2/5)
Dr (-)
$
3 620
Cr (+)
$
Balance
3 620 Dr
24 890
17 270
4 000
(b)
Add:
Less:

Other Income
$
$
Rent Income
17 270
Expenses
Insurance Expense
(35 000)
(c)
$
Current Assets
7 100
Current Liabilities
4 000
(d)
If prepaid expenses $7100 was not adjusted, expense overstated by $7100
Profit understated by $7100, current Assets understated by $7100

Question 3
(a)
Accrued expense is expense incurred in the current financial
period that will be paid in the subsequent period.
The business has benefited from the service but has not paid for it yet.
Accrued expense is classified as current liabilities in the balance sheet.
Income received in advance / Uearned Income
Income received in advance or unearned income is money received in the
current financial period for which goods and services have not been provided to
customers yet.
Income received in advance or unearned income is classified as
current liabilities in the balance sheet.
(b)
Commission Income Account
Date
2013
Aug 1
Aug 4
Dec 31
Dec 31
Particulars
Commission Income Receivable
Cash at Bank
Commission Income Received in Advance
Profit and Loss
Dr (-)
$
180
Cr (+)
$
800
232
388
Balance
180 Dr
620 Cr
388 Cr
0
Education Tours Income Account

Date
2014
Aug 1
Aug 10
Aug 17
Aug 31
Dec 31
Particulars
Education Tours income received in advance
Cash in hand
Drawings
Education Tours income receivable
Profit and Loss
Dr (-)
$
4 028
Cr (+) Balance
$
700
700 Cr
1 200
1 900 Cr
1 278
3 178 Cr
850
4 028 Cr
0
(c)
Add:
Income Statement for the year ended 31 August 2014 (extract)

Other Income
$
Commission Income
388
Education Tours Income
4 028
4 416
(d)
Balance Sheet as at 31 August 2014 (extract)

$
Current Assets
Education Tours income receivable
850
Current Liabilities
232
(e)
If commission income received in advance $232 was not adjusted, income overstated by
$232 Current Liabilities understated by $232

Question 4(a)
Date
2014
Jun 1
2015
May 31
May 31
May 31
Date
2014
Jun 1
2015
May 31
May 31
May 31
(b)
Add:
Less:

Particulars
Dr (+)
Cr (-)
$
3 300
Accrued Insurance Expense

Profit and Loss
Cash at Bank
28 880
Commission Income Account
Particulars
Dr (-)
$
23 180
2 400
Cr (+)
$
1 600
Balance
3 300 Cr
26 480 Cr
28 880 Cr
28 880 Dr
Balance
1 600 Cr
Cash at Bank
5 500
7 100 Cr
1 700
8 800 Cr
Profit and Loss
8 800
0
Other Income
$
$
Commission Income
8 800
Expenses
Insurance Expense
(23 180)
(c)
$
Current Assets
2 400
1 700
4 100
(d)If commission receivable $1 700 is not adjusted, income understated by $1 700.
Current Assets understated by $1 700.
(e)
General Journal
Date
Particulars
Dr ($)
Cr (S)
2014
Jun 1
2015
May 31

Commission Income
1 600
Cash at Bank
Commission Income
5 500

Commission Income
1 700
Commission Income
Profit and Loss
8 800
1 600
5 500
1 700
8 800

Chapter 11 Prepayments and Accruals Mix

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Chapter 11 Prepayments and Accruals

11.3 Prepayments & Accruals (Mix)

Utilities Expense Account

Accrued Utilities Expense

Insurance Expense Account

Rent Income Account

Income Statement for the year ended 31 December 2013 (extract)