Kaplan Revision Book Accounts Preparation I 2011/12

MWAUGH1983
MWAUGH1983 Trusted RegularRegistered Posts: 420
Hi All,

I am looking at question 9 in this book for accruals and expenses. Can someone explain where the figures come from balance c/d and profi and loss?

Cheers in advance!

Martin

Comments

  • Louise89
    Louise89 Trusted Regular England, UKMAAT Posts: 296
    ?

    There isn't a Question 9 in this chapter?
  • MWAUGH1983
    MWAUGH1983 Trusted Regular Registered Posts: 420
    Its the revision booklet not work/turtorial book.
    Cheers
    Martin
  • sdv
    sdv Experienced Mentor Registered Posts: 585
    MWAUGH1983 wrote: »
    Hi All,

    I am looking at question 9 in this book for accruals and expenses. Can someone explain where the figures come from balance c/d and profi and loss?

    Cheers in advance!

    Martin

    There are two expense accounts in that question; Admin expense and Selling expense

    Admin expense has a prepayment of £1800 at the end of the year; and
    selling expense has an accrual of £ 900 at the end of the year.

    We shall deal with Admin expense

    Normally the double entry will be Debit Prepayment a/c £900 and Credit Admin expense £900. Then close the Admin and transfer the balance in the admin account to P&L a/c.

    In the new accounting period there will be zero balance in the Admin account. On the very first day of the new period we need to reverse the Prepayment journals; thus

    Debit Admin expense with £900 and Credit Prepayment account with £900.

    The prepayment account is now cleared and closed and the The admin account now correctly shows that £900 of the expense that belongs in this period but paid in the last period showing a Debit balance of £900 in the admin account.

    Now the Kplan book (AAT exam method) does not use the prepayment account but instead uses a shorcut and the prepayment is carried down with the balance of the account transfered to the P&L account.

    So in the new year you do dot have to reverse the prepapyment juournal because the perpaid expense was correctly brought down on the debit side.

    Same with the accruals but on the oppsite side.

    I hope this explanation helps
  • MWAUGH1983
    MWAUGH1983 Trusted Regular Registered Posts: 420
    sdv wrote: »
    There are two expense accounts in that question; Admin expense and Selling expense

    Admin expense has a prepayment of £1800 at the end of the year; and
    selling expense has an accrual of £ 900 at the end of the year.

    We shall deal with Admin expense

    Normally the double entry will be Debit Prepayment a/c £900 and Credit Admin expense £900. Then close the Admin and transfer the balance in the admin account to P&L a/c.

    In the new accounting period there will be zero balance in the Admin account. On the very first day of the new period we need to reverse the Prepayment journals; thus

    Debit Admin expense with £900 and Credit Prepayment account with £900.

    The prepayment account is now cleared and closed and the The admin account now correctly shows that £900 of the expense that belongs in this period but paid in the last period showing a Debit balance of £900 in the admin account.

    Now the Kplan book (AAT exam method) does not use the prepayment account but instead uses a shorcut and the prepayment is carried down with the balance of the account transfered to the P&L account.

    So in the new year you do dot have to reverse the prepapyment juournal because the perpaid expense was correctly brought down on the debit side.

    Same with the accruals but on the oppsite side.

    I hope this explanation helps

    Thanks that does make a little bit of sense.

    In regards to the accrual where do the figures for bal c/d 1800 and p and l 4600 come from?
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