Prepayments & Accruals Question?

AngelDust
AngelDust LondonRegistered Posts: 30
Hi, can anybody please help with the following trial balance adjustments?

1. The rent started the year with an opening prepayment of £1700. The final payment of £2625, which was paid in January 2014, covered the period February to April 2014.

2. The rates started the year with an opening accrual of £850. The final payment of £2565, which was paid in February 2014, covered the period December 2013 to February 2014.


Closing balance for the Rent account: £12,050 DR
Closing balance for the Rates account: £9,380 DR

For 1, I've calculated £875 prepayment (2625 / 3 = 875) prepaid expense for Rent a/c

For 2, I've calculated £2565 accrual, as it's accrued expense for Rate a/c

Is this correct?

Thank you for your time!

Comments

  • LearningAcademy
    LearningAcademy Registered Posts: 18
    Hi

    Crucial information about the financial year is missing. However, looking at your first question, it appears to be April to March 2014.

    If that is the case,
    1 - is correct
    2 - appears to be incorrect. The information provided tells us that the last payment was for the period up to February 2014 only - i.e. payment for March 2014 is not made. Rates for March 2014 will work out to be £855 (£2565/3). Therefore, the accrual amount will be £855 and not £2565 as you have calculated.

    This is of course subject to the financial year being March-April 2014.

    Thanks
  • AngelDust
    AngelDust LondonRegistered Posts: 30
    edited July 2015
    The financial year end is 31st March 2014 @LearningAcademy
  • LearningAcademy
    LearningAcademy Registered Posts: 18
    Thanks @AngelDust
    Our comments would hold good, then.
Privacy Policy