Help needed - FRA Dec 05 Paper ACCRUALS!
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Hi
Wondered if anyone can help me please?
Little late in the year (considering FRA exam is tomorrow :oops: ) to be asking this but can anyone help me with Dec 05 FRA question 1.2 on Accruals -
Theres £15,000 paid in the bank for rent, an accrual in the previous year for rent - £1,000, and within the 15,000, £3,000 was paid on 1 October 2005 for a quarter. (The year end is 31 October 2005). I've got the answer for it, but cant get my head around how you do it? Can anyone help me out please?!
Wondered if anyone can help me please?
Little late in the year (considering FRA exam is tomorrow :oops: ) to be asking this but can anyone help me with Dec 05 FRA question 1.2 on Accruals -
Theres £15,000 paid in the bank for rent, an accrual in the previous year for rent - £1,000, and within the 15,000, £3,000 was paid on 1 October 2005 for a quarter. (The year end is 31 October 2005). I've got the answer for it, but cant get my head around how you do it? Can anyone help me out please?!
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Re:Help needed - FRA Dec 05 Paper ACCRUALS!
Putting the 15K on the debit side as that was total rent paid, you put last years accrual on cr side as has been accounted for last year and put this year prepayment of £2k on cr side which is part of next years rent.0 -
Re:Help needed - FRA Dec 05 Paper ACCRUALS!
Thanks.0 -
Re:Help needed - FRA Dec 05 Paper ACCRUALS!
I would have thought the rent recieved account for last year would be credited 1000 and the accrual account would be debited as this would make the benefit of the £1000 apply to last year. Then in the next fy the accrual account would be credited and the bank debited.
For the £3000 I thought £3000 was paid into the bank in the previous fy so the bank account would be debited £3000. Of that £1000 would be credited to the rent recieved account and £2000 credited to the prepayment account. Then in the next fy the prepayment account would be debited £2000 and the rent received account would be credited £2000.
Shouldn't this be accrued income instead of accruals as well since it's money the business is recieving. Accruals are used to put the expense of a payment into the previous year when it should have been paid. Maybe I'm wrong in which case ignore my mad ramblings
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Re:Help needed - FRA Dec 05 Paper ACCRUALS!
in the accounting magazine the chief assessor explain this task saying:
-There was a credit entry to the bank a/c for rent £15000
-there was an opening accrual of £1000
-there was a closing accrual of £2000
Why closing accrual?? it's prepayment in the exam solution!!
If this £3000 was for the quarter starting 1 October 2005 and the end of the year is 31 October, should not be only £1000 of prepayment?
oh, i'm so confused!!! :-(
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Re:Help needed - FRA Dec 05 Paper ACCRUALS!
-There was a credit entry to the bank a/c for rent £15000
Ah so it was a credit entry to the bank. The first poster said the 15,000 was paid into the bank which would make it a debit entry. This of course means it's not a rent recieved account which would be used so my earlier reply is answering a different question.
Why closing accrual?? it's prepayment in the exam solution!!
Probably just a typing error.
If this £3000 was for the quarter starting 1 October 2005 and the end of the year is 31 October, should not be only £1000 of prepayment?
No because only 1 month of the quarter is in the previous fy. This means that 2 months worth of rent should have been paid in the next fy. Therefore £2000 should have been paid in the next fy. So £2000 was prepaid as it was payment for next years rent therefore the expensive will need to be put forward to next year.0 -
Re:Help needed - FRA Dec 05 Paper ACCRUALS!
Hi
Bank 15,000 debit
opening accrual 1,000 credit
The prepayment for 2,000 was c/d on the credit side so when you balance the account off, the prepayment that you c/d which was 2,000 would then be b/d on the debit side as the opening balance. I have learnt to remember that accruals are always b/d on the credit side and prepayment are always b/d on the debit side. hope this helps or perhaps i have confused you more.
Im stuck on task 2.1 of the december 05 paper, i have found this paper really hard compared to the other past papers. dont think im ready for that exam tomorrow.
Aly
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Re:Help needed - FRA Dec 05 Paper ACCRUALS!Phate wrote:-There was a credit entry to the bank a/c for rent £15000
Ah so it was a credit entry to the bank. The first poster said the 15,000 was paid into the bank which would make it a debit entry. This of course means it's not a rent recieved account which would be used so my earlier reply is answering a different question.
Why closing accrual?? it's prepayment in the exam solution!!
Probably just a typing error.
If this £3000 was for the quarter starting 1 October 2005 and the end of the year is 31 October, should not be only £1000 of prepayment?
No because only 1 month of the quarter is in the previous fy. This means that 2 months worth of rent should have been paid in the next fy. Therefore £2000 should have been paid in the next fy. So £2000 was prepaid as it was payment for next years rent therefore the expensive will need to be put forward to next year.
oh thank you so much, now it makes sense!
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