Accruals and Prepayment Ex 1 The financial year of L McLeod ended March 31, 2008.

The data below provides information on general expenses, insurance, rent received (revenue) and Commission received (revenue). (1) (2) (3) General expenses: Amount owing at April 1, 2007 was $35. Amount paid during the year was $1 500. Amount owing at March 31, 2008 was $47. Insurance: Amount prepaid at April, 2007 was $200. Amount paid during the year was $3 200. Amount prepaid at March 31, 2008 (included in the $3 200) was $240. Rent revenue: Amount received in advance at April 1, 2007 was $300. Further rent received during the year was $1 200. Rent received in advance at March 31, 2008 (included in the $1 200) was $250. Commission revenue: Amount owing at April 1, 2007 was $700. Commission received during the year was $3 500. Commissions received owing at March 31, 2008 was $800.

(4)

Required: (a) (b) Exercise 2 Use ledger accounts to record the information above showing clearly the amounts, which will be transferred to the Profit and Loss Account. Identify the Balance Sheet item under which commission revenue owing at March 31, 2008 in (4) above will appear. The Cashbook of Susie Sweet bun showed the following payments: $ Rent 9,500 Water rates 2,900 Janitors wages 7,600 Loan interest 620 Motor Insurance 2 750 At the end of the financial year 31, March 2008, the following adjustments have to be made before the preparation of the Trading and Profit and Loss account and Balance Sheet: $ Rent due 3,300 Motor insurance paid in advance 1 120 Water rate prepaid 1,250 Janitors wages owing 3,990 Loan interest unpaid 220 Prepare the Ledger accounts for the relevant items showing clearly: (a) (b) (c) Exercise 3 The amount to be transferred to the profit and loss account for the year. The balance brought down on each account The headings under which they will appear in the Balance Sheet.

V Singh received a monthly rent of $3,000 for his property. While going through his book he noticed that his tenant had paid him $1,000 in advance on April 30. During the month of May the following amounts were received: $ $ May 04 Cheque for 500 May 15 Cash of 500 21 Cheque for 900 23 Cheque for 900 26 Cash of 500. You are required to: (i) Prepare Singhs Rent Received Account (ii) Determine his balance at May 31, 2008 and state whether it is owing or prepaid.

Exercise 4

Te Merry Social Club had 100 members, each paying $150 for yearly membership fees. At January 1, 2007, 20 members were still owing for the previous year 2006 and 15 members paid in advance for the current year. During the year 2007, members paid $16,650, of which six (6) members paid for 2008. You are required to: (a) Prepare a Membership Account for the year 2007. (b) Explain the balances in the Membership Account at December 31, 2007

Exercise 5

Paul Property Rental collected rent for a number of properties. Each rental contract stipulated quarterly payments in advance. 1, January 2007 Rent received in advance $6,000 Amount received during the year 31 March $5,700

30 June $4,600 30 September $5,900 31 December $9,000 The annual rent to be received is $30,000. (a) Prepare the Rent Received Account from the information above. (b) State the amount that will appear in the Balance Sheet in relation to rent revenue and state whether it is a current asset or a current liability. Exercise 6 G Gomes is in business as a sole trader. He keeps proper accounting records. The following shows the extraction of his trial balance for the year ended December 2007. Trial Balance as at December 31, 2007 Drawings Insurance Electricity Debtors Cash at Bank Stock (January 1, 2007) Loan Discount Allowed Discount Received Premises Furniture & Fittings Rent Capital Creditors Commission Received Sales Purchases $ 3 937 6 550 6 950 17 753 50 003 77 894 1 982 2 149 113 000 37 090 15 300 177 992 15 676 13 859 105 658 ______ 370 334 ====== $

55 000

40 875 370 334 ======

The following adjustments were made at December 31m 2007: 1. 2. 3. 4. 5. Stock was valued at $50,736. Rent owing was $1 748. Insurance prepaid was $570. Electricity paid in advance was $500 Commission received was owing to Gomes, $405.

You are required to prepare G Gomes final accounts and balance sheet for the year. Exercise 7 The following Trial Balance was extracted from the books of UL Dealers Computer as at April 30, 2008 after completion of the Trading Account. $ $ Gross Profit 146 450 Closing Stock 58 500 Land 98 000 Buildings 75 000 Motor Vehicles 60 000 Wages 16 000 Provision for Bad Debts 920 Motor Vehicle Expenses 10 500 Discount Allowed 4 300 Debtors 29 500 Provision for Depreciation: Buildings 25 000 Motor Vehicles 35 000 Capital 145 000 Rent Expense 12 000 Carriage Outwards 700 Sundry Expenses 2 870 Long Term Loan 15 000 Additional information: 1. Rent has been prepaid $1 500 2. The company maintains a provision for bad and doubtful debts of 5% of total debtors. 3. Depreciation is provided as follows: Building 5% per annum straight line Motor Vehicles 10% per annum reducing balance 4. Interest payable on loan is 10%. No interest has been paid for the current year. Required a) Prepare the Profit and Loss Account of UL Dealers for the year ended April 30, 2008 and the Balance Sheet. (Use vertical format)