Hi guys
I have troubles to find the answer to this exercise I enclosed. I want to concentrate on part a). In picture with the answer I don't know where
figures 4600 and 1800 come from. Can you help me to understand where those figures come from ?
-- Edited by rafapak on Saturday 22nd of April 2017 12:44:48 AM
Hi Rafal
Is this a bpp book example? I dont like the way its showing, especially if this is an early question showing you how it works, but thats just my view.
Anyway - do you know how to work out the prepayment for THIS year?
Break the question down into manageable chunks and write down the key points on a bit of paper - always makes it easier to work out.
Year end 31 March.
The invoice received which needs prepaying cover three months - March, April and May.
Therefore only the March element needs including in the year end. Therefore the other two months are early and are prepaid.
£2700 divided by the three months, x 2 prepaid is £1800. x 1 = £900 is included in the year.
So the £1800 is prepaid - ie you need to reduce the expenses account (credit) and increase prepayments account (debit).
£7190 minus the £790 and minus £1800 means that £4600 is the actual amount of admin expenses for the year - this amount is transferred to the P&L.
Can I suggest that if this is a bpp book that you also buy Kaplan or Osborne. This is the topic that most students seem to struggle with at Level 3!!!!!
HTH
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
thanks Joanne for reply. This is from kaplan book but I already ordered bpp . Delivery next week. Part a) of this exercise is confusing cause usually they teach you accruals and prepayments separately. In this exercise accrual appears first 790 and prepayment appears later. I never saw accrual and prepayment together in one exercise before.
-- Edited by rafapak on Saturday 22nd of April 2017 12:14:03 PM
-- Edited by rafapak on Saturday 22nd of April 2017 12:56:52 PM
