I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART D: RECORDING TRANSACTIONS AND EVENTS 

 

188

 

The bills are paid promptly, as soon as they are received. 

(a) 

Calculate the charge for photocopying expenses for the year to 31 August 20X4 and the amount 

of prepayments and/or accrued charges as at that date 

(b) 

Calculate the charge for photocopying expenses for the following year to 31 August 20X5, and 

 

the amount of prepayments and/or accrued charges as at that date 

ANSWER 

(a) 

Year to 31 August 20X4 $ 

One month's rental (1/3 × $2,100) * 

700 

Accrued copying charges (1/3 × $1,500) ** 

    500 

Photocopying expense (statement of profit or loss) 

 1,200 

* 

From the quarterly bill dated 1 August 20X4 

** 

From the quarterly bill dated 1 November 20X4 

There is a prepayment for 2 months' rental ($1,400) as at 31 August 20X4. 

(b) 

Year to 31 August 20X5 

 

$ 

$ 

Rental from 1 September 20X4 – 31 July 20X5 (11 months at 

 

 

   $2,100 per quarter or $700 per month) 

 

 7,700 

Rental from 1 August – 31 August 20X5 (1/3 × $2,700) 

 

    900 

Rental charge for the year 

 

 8,600 

Copying charges: 

 

 

  

1 September – 31 October 20X4 (2/3 × $1,500) 

 1,000 

 

  

1 November 20X4 – 31 January 20X5 

 1,400 

 

  

1 February – 30 April 20X5 

 1,800 

 

  

1 May – 31 July 20X5 

 1,650 

 

  

Accrued charges for August 20X5 (1/3 × $1,950) 

    650 

 

 

 

   6,500 

Total photocopying expenses (statement of profit or loss) 

 

 15,100 

There is a prepayment for two months' rental ($1,800) as at 31 August 20X5. 

Summary of year 1 September 20X4 – 31 August 20X5  

 

Rental charges  Copying costs 

 

$ 

$ 

Prepayments as at 31.8.20X4 

 1,400 

 

Accrued charges as at 31.8.20X4 

 

 (500) 

Bills received during the year 

 

 

  

1 November 20X4 

 2,100 

 1,500 

  

1 February 20X5 

 2,100 

 1,400 

  1 

May 

20X5 

 2,100 

 1,800 

  

1 August 20X5 

 2,700 

 1,650 

Prepayment as at 31.8.20X5 

 (1,800) 

 

Accrued charges as at 31.8.20X5 

          

    650 

Charge to the statement of profit or loss for the year 

 8,600 

 6,500 

Statement of financial position items as at 31 August 20X5 

 

 

  

Prepaid rental (current asset) 

 1,800 

 

  

Accrued copying charges (current liability) 

 

 650 

1.7 Example 5: accruals 

Willie Woggle opens a shop on 1 May 20X6 to sell hiking and camping equipment. The rent of the shop 

is $12,000 per annum, payable quarterly in arrears (with the first payment on 31 July 20X6). Willie 

decides that his accounting period should end on 31 December each year. 

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CHAPTER 10  

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  ACCRUALS AND PREPAYMENTS