Incomplete records/FRA practice exams

MyrkMyrk Just JoinedPosts: 4Registered
Hi everyone,

I'm new to these forums so hopefully this is in the right place!

Can I draw your attention to the practice FRA exam December 2007 which I have in front of me :/

I am totally confused by task 1.2 - why is the figure for 'bank' on the debit side and rent for the year on the credit side? I thought rent is an expense account so therefore the balance should be on the debit side and likewise payments on the credit side ?

Any help greatly appreciated :)

Comments

  • BluewednesdayBluewednesday Font Of All Knowledge Posts: 1,624Registered
    Is it rent being received by the company? I don't have the simulation so can't check but that would be why a debit entry is in the bank and why the credit is in the rent account
  • MyrkMyrk Just Joined Posts: 4Registered
    Im not sure the bank money is in the cash book on the cr side which is the payment side. Its the FRA december 2007 exam (past paper) on the aat website.
  • RichardRichard Trusted Regular Posts: 373Registered
    There are prepayments to be taken into account for this question.

    There is a DR in the rent account for £6,250 and a corresponding credit in the bank as this is the amount of rent that has been paid through the bank - this figure does not reflect the actual amount of rent paid for the accounting period.

    There is a prepayment carried forward from the previous year for £750 - this was paid through the bank account in the previous year, but relates to this period - likewise, the £6,250 payment includes rent for the quarter ending December for £1,500 - as the accounts end October, we need to remove 2 months rent from the account (1,500 x 2/3 = 1,000).

    Therefore the rent charge for the period is 750 + 6,250 - 1000 = 6,000.

    This would normally show as the balance figure, but this particular question is asking you to highlight the rent payable figure for the year.
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