Help

Tracie1977

I am current studying Diploma level 3 and i am a little stuck if anyone can help

I am trying to produce an income statement from limited informatation and i am a little stuck on the below: -

The income statement is dated 31 May 2010

On the 1 June 2009 i am told that prepayments for insurance stands at 15000
On the 31 May 2010 im am told that the balance for insurance stands at 25000

Where does the prepayment from the end of the previous year fit in with the income statement for the current year.

Anyones help would be much appreciated :001_smile:

CeeJaySix

Assuming no adjustments have yet been made:

The prepayment from the prior period relates to this period and so needs to be removed: dr insurance cr prepayments 15,000. This leaves the insurance expense at 40,000 in the P&L. Of course there may be a new prepayment that's already been made relating to the next period, in which case you would dr prepayments and cr insurance expense.

Tracie1977

Many thanks for your help, now it make sense. Much appreicated :thumbup1: