Accrual

hanapospis
hanapospis Registered Posts: 111 ? ? ?
Hi,

I am new in this forum and I was wondering if you could help me.

I am just doing FRA test2 (distance learning) and Ive got a bit confused with one question:

A rent demand for 210 for the 3 months ended 30 June 2005 was not received until July2005.

I am doing ETB, balance sheet and profit and lost ac for year ended 30June2005.

Will this be posted as an accrual of Income?

Credit Rent receivable and Debit Accruals?

So in P& L it will be income and in BS current asset?

I have gone throught all excercises in my book (osborne) there is alwas only accrual of expenses....

Thanks xxx

Comments

  • peugeot
    peugeot Registered Posts: 624
    Hi,

    You're nearly there but just got the entries the wrong way round.:thumbup1:

    The rent demand (the invoice) will be debit rent and credit accruals as it relates to the year ended 30 June 2005.

    The rent (expense) is a debit and the accrual (a creditor) is a credit in the balance sheet.

    So in the ETB debit rent payable £210 and credit accruals £210.

    Best regards
    Steve
  • hanapospis
    hanapospis Registered Posts: 111 ? ? ?
    Hi,

    Thanks!! I have got it now! So the invoice was not received till 1Jul not the money :-)

    Thanks!!!
  • peugeot
    peugeot Registered Posts: 624
    Sorry I may be misunderstanding the word 'demand' does the question have rent receivable in the ETB if it does then the rent 'demand' might well be income receivable in which case you should debit debtors and credit rent income.

    I interpreted the word 'demand' as 'invoice'!!

    Best regards
    Steve
  • hanapospis
    hanapospis Registered Posts: 111 ? ? ?
    no, it doesn't have the rent receivable in ETB. I created it before.

    As I have interpreted the word demand as a "request"

    I am so confused now :crying::crying:
  • peugeot
    peugeot Registered Posts: 624
    I think it may be a demand from the landlord (ie an invoice from the landlord was not received until 1 July). I would debit rent and credit accruals/creditors.

    Kind regards
    Steve
  • hanapospis
    hanapospis Registered Posts: 111 ? ? ?
    Yes, it sounds quite clear now.

    Thank you, I do as you suggested.
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