FRA Exam Question - confused at answer!
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Hi there,
I'm sure someone can point me in the right direction - but at the moment I can not understand the workings out of task 1.2 of the recent FRA exam we all took in June.
This is the question on selling expenses/accruals.
I understand that £2,395.00 was paid out on selling expenses for the year and that an accrual was put through for £205.00 for services received but not yet paid/invoiced for.
I'm really confused on how the new accrual for £260.00 comes about, even with the workings out.
I would have thought you'd take £390.00 (paid off in the May) divide it by 4 to give you Jan - April and the take 3 of those months Jan-March as year end is March 31st.
Can anyone point out where Im going wrong - be much appreciated!! Louise :-)
I'm sure someone can point me in the right direction - but at the moment I can not understand the workings out of task 1.2 of the recent FRA exam we all took in June.
This is the question on selling expenses/accruals.
I understand that £2,395.00 was paid out on selling expenses for the year and that an accrual was put through for £205.00 for services received but not yet paid/invoiced for.
I'm really confused on how the new accrual for £260.00 comes about, even with the workings out.
I would have thought you'd take £390.00 (paid off in the May) divide it by 4 to give you Jan - April and the take 3 of those months Jan-March as year end is March 31st.
Can anyone point out where Im going wrong - be much appreciated!! Louise :-)
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Re:FRA Exam Question - confused at answer!
Hi Louise,
the closing accrual is calculated by dividing 390.00/3 to get the monthly charge = £130.00. There are only 3 months in a quarter, and the accounting quarters of the business which you are doing the accounts for - does not have to be the same as the quarter detailed by my supplier - and vice versa.
Then as we are doing our year end - and not our suppliers, we need 2 months of this charge which was paid in May - so 130.00 x 2 = 260.00. this is the closing cost accrual we need in the books.
The fact that it was paid in May - to me was just to lean you to the fact that there should be an accrual for this.
As, also - if they bill you on a quarterly basis - i would expect there previous bill to this one to have been paid in Feb - covering their qtr charges for NOV/DEC/JAN.
hope this helps?
Chris0