doubt

Re:doubt

Task 1.1
The prepayment (£1100) in the list of balances is for rent. The figure for rent in the bank summary on
page 4 includes £1,200 for the quarter ended 30 June 2006.
Prepare the rent account, showing clearly the rent for the year ended 31 March 2006.

If you think about it carefully, the value of the rent expense for this year is equal to:

the amount already paid to the creditor that related to this year
PLUS
the amount paid from the bank to the creditor this year
LESS
the amount paid to the creditor that relates to next year

Firstly, you need to enter the opening balance. This is the prepayment mentioned in the task, representing money paid last year that was actually for this year's rent. This is an asset, so it does in the debit column. DR £1100 (from the list of balances)

Secondly, the amount actually paid this year needs to be entered. This is an expense, so also goes in the debit column. DR £4900 (from the bank summary)

Thirdly, we are told that £1200 of the amount paid in this year is actually for next year. This forms the closing balance (best to leave a line) This is a prepayment, so goes in the credit column here. CR £1200

Fourthly, the rent for this year is found by balancing the account:

Rent = £1100 + £4900 - £1200 = £4800

Hope this helps