DFS Help Exam paper june 2006 Trustdan plc

zoeeileen

Hi hoping someone can help me, i am working on an exam paper from BPP book 2007.

You know when you are asked to produce the journals in this case on task 1.3, and then transfer the information to either the balance sheet or income statment.

For example Interest on the bank loan has not been included in the accounts for the last 6 months in the trial balance.

You put the full amount for the 12 months on the Income Statment, so why do you only put 1/2 of the amount on the balance sheet.

Just a bit confused with it really, thank you all. Zoe:001_smile:

Richard

The total interest charge for the year at 8% is £400. However, 6months has already been charged to the income statement, so the other 6 months needs to be accrued for. This £200 accrual is a liability so will therefore be shown on the balance sheet as it is still outstanding.

mehmet

The full interest expense for the year is £400 (£5000 x 8%).

In the trial balance there already is an Interest expense of £200 (half of the full expense), which has already been paid within the year. However, the balance of £200 has yet to be paid and should be accrued for, therefore it is a liability and has to go on the balance sheet.

The full amount of £400 has to go onto the Income Statement as that is the true Interest expense for the year.