FRA Dec 2004

111111

I find difficult the understand FRA Dec 04 task 1.7

Prepare the rent account and show the rent for year.

Prepayment for rent 550, cash and bank summary rent- 2,600 and prepayment for next year 650.

The answer stated

Dr Bal b/d 500 Cr rent for year 2,500
Dr Bank 2,600 Cr Bal c/d (prepa) 650

I can see the prepayment 650 is carried down but why the rent for that year is Cr if that is expens...???

NO BUSINESS CASE

Your prepayment would be DR 650 in current assets whilst your CR entry would be from the Rent account thus reducing the rent charged for the year.

If you follow the rent account as:- 550 + 2600 - 650= Yearly total £2500