Help needed with Accruals/Prepayments (Practice Assessment 1 Osbourne Books)

petekavee15

I'm going through this assessment and accruals and prepayments is something I'm having trouble understanding. I'm on question (task) 3 about the receipt of commission.

it says that the commission receiveble account at the begining of the financial year is £600. This represents an accrual for commission receiveable as at the end of the year on 31 March 20x0

the cash book for year (which year!!!??) shows receipts for commission recieveble of £7000

The commission receiveble account has been correctly adjusted for £750 commission for the month of March 20x1.

Double entry book accounting is done in the general ledger.

complete the following statements by calculating the required figure and selecting ONE option from each box.

"On 1 April 20x0 the commission receiveable account shows a DEBIT/CREDIT balance of £_____"

"On 31 March 20x1 the commission recieveable account shows an adjustment for"

ACCRUED EXPENSES
ACCRUED INCOME
PREPAID EXPENSES
PREPAID INCOME

Calculate the commission receiveble for the year ended on 31 March 20x1


I don't know if its the wording of the question, but I don't know where to begin on this question. Any help with this one?

thanks

CeeJaySix

Once you grasp the concept these are quite straightforward to walk through logically.

The accrued commission receivable at the start of the year is income which you have earned in the prior period, but not yet received - it is a receivable (and therefore shows a debit balance in the receivables account).

The cashbook shows the actual receipts in the year (ie. not the amount earned, just the amount received).

You are also given a new accrued income figure for the year end. This would form the basis of the adjustment to the year-end receivable account.

To follow through the figures given:

at 31 Mar 10 you are owed £600.
During the year you receive £7,000. Of this you were owed £600 from the last period as above. The remainder relates to the year in question.
At 31 Mar 11 you are owed £750, which also relates to the year in question.

Commission receivable for the year is therefore 7,000 - 600 + 750 = £7,150.

Does that make it any clearer?