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• # 76423
• Mon 14 Nov 2011 01:51 PM

Ok, I totally understand accruals and prepayments, why they are used, had to work them out in a previous job every month, although never did the actual journal postings.

I'm doing Progress Test 4 and getting confused with question 3 which asks you to calculate the amount to be accrued or prepaid up to 31st December 2008.  Few of the items are;

15/2/2008 Rent (6 months in advance to 31st August) £3600 - surely this wouldn't be prepaid at the end of December 2008 as the 6 months would be over and completed?

18/2/2008 Rates (6 months in arreras to 31st March) £2400 - again this would relate to the previous years rates, ie running from October 2007 - March 2008 so again wouldn't effect December 2008 accounts?

Now am I getting completely confused with this or is the question not being explained clearly enough?

 

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• # 76424
• Mon 14 Nov 2011 02:15 PM

Hi Jak

You're right that the two payments you've listed wouldn't be taken into consideration when calculating the accruals and prepayments at the end of December 2008. The question gives you the figures for the whole year, and you need to work out which ones apply.

There are two further payments listed in the question:

15/08/2008 Rent (6 months in advance to 28 February)     £4,800
18/08/2008 Rates (6 months in arrears to 30 September)  £3,000

You can see from these that some of the rent will be for the next financial year, but some rates will still be unpaid at the end of this financial year. From the figures, you can work out what the corresponding accrual and prepayment amounts will be.

Hope that helps!

Kate

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• # 76429
• Mon 14 Nov 2011 03:05 PM

Thanks Kate, pretty much what I thought, think the question confused me by having unnecessary detail from the previous year and not really explaining any of this in the answer.

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