Accrals & Prepayment

[smokiesue]

:oops: just been told i posted this in the wrong section before how stupied is that, :( I wondered as i'm no longer on this course i wondered if any kind person could tell me where i went wrong just for my own benefit then if i ever start the course again i would at least under stand where i have been going wrong in this section,

Questions 1 -5 Calculate the Accrual (or prepayment)
1) Rent paid to 31st Dec 94 £1200pa A = (300) B = 300 C= 900 D=nil
I choose B = 300

2) Rates paid to 31st May 95 £2400pa A= (400) B=(800) c= nil D= 800
I choose A = (400)

3) Insurance paid to 30th Jun 95 £600pa A=nil B= 150 C= (150) D=300
I choose A = Nil

4) Salaries paid to 28th Feb 95 £12000pa A = nil B = 1000 C= (1500) D=(1000)
I choose D = (1000)

5) Wages paid to 31Mar 95 £36000pa A=3000 B=(3000) C=nil D= 6000
I choose C = Nil

Questions 6 - 10 Select the ledger Account Balance DR or (CR) for each item after reversal of the entries on 1st April 5

6) Rent A= (300) B = 300 C = 900 D = 300
I choose B = 300

7) Rates A = (400) B = (800) C=nil B=400
I choose C= Nil

8) Insurance A= nil B = 1000 C= (150) D = 300
I choose B = 150

9) Salaries A = nil B = 1000 C = (1500) D = 1000
I choose D = 1000

10) Wages A = 3000 B = (3000) C = nil D = 6000
I choose A = 3000

Questions 11 - 15
Select the journal entry DR or (CR) to be made in the Nominal ledger to record these Accruals and prepayments at 31st Mar 5

11) Rent A = (300) B = 300 C = 900 D = nil
I choose A = (300)

12) Rates A = 400 B = (800) C = nil D = (400)
I choose D =(400)

13) Insurance A = nil B = 150 C = (150) D = 300
I choose A = Nil

14) Salarie A = nil B = 1000 C = (1500) D = (1000)
I choose D = (1000)

15) Wages A = 3000 B = (3000) C = nil D = 6000
I choose C = Nil

I do hope some kind person might be able to help me, theres nothing like looking at it but not knowing what is right or wrong or how they was worked out, i would like to that this forum for the help you have given to me in the past,

Kind Regards
Sue :D

[gj]

What you haven't said in your repost is that the business year ends on 31 March 1995.

The term prepayment is perhaps easier to understand than the term accrual. A prepayment arises if at the year end the business has paid in advance for something ie prepaid. An accrual is the opposite, the company has yet to pay for something, but it will have to.

So for Question 1:

Rent paid to 31/12/94 of £1,200 means as at 31/3/95, the company owes a firther 3 months rent, so there is an accrual for £300= answer B

Q 2 Rates paid to 31/5/95 £2,400 means that at 31/3/95, the company has paid 2 months in advance ie April and May, so there is a prepayment of £400 = answer A (as you had)

Q3 Insurance paid to 30/6/95 of £600 - similar to above but 3 months prepaid is £150 = answer C

Q4 Salaries paid to 28/2/95 £12,000 pa - company therefore owes 1 month salary as at 31/3/95 = accrual of £1,000 = answer B

Q5 Wages paid to 31/3/95, with year end of 31/3/95 means there is at that stage neither a prepayment nor an accrual = answer C

When an accrual reverses on day 1 of the new year, there is a credit to the ledger account for that expense.

When a prepayment reverses, there is a debit to the ledger account for the expense.

So:

Q6 Rent in Q1 was an accrual, so there is a credit to the rent ledger account at 1/4/95

Q7 Rates in Q2 was a prepayment, so there is a debit to the rates ledger account at 1/4/95

Q8 Insurance in Q3 was a prepayment, so there is a debit to the insurance ledger account at 1/4/95

Q9 Salaries was an accrual in Q4, so ther is credit to the salaries ledger account at 1/4/95

Q10 Since there was no accrual or prepayment in Q5, there is no entry to the wages ledger account as at 1/4/95

When creating a prepayment, you debit the prepayments account and credit the expense account.

When creating an accrual you credit the accruals account and debit the expense account.

So:

Q11 Rent was an accrual, therefore entry to rent account at 31/3/95 is a debit

Q12 Rates was a prepayment, therefore there is a credit to rates account at 31/3/95

Q13 Insurance was a prepayment, therefore there is a credit to Insurance account as at 31/3/95

Q14 Salaries was an accrual, therefore there is a debit to salaries account

Q15 No accrual or prepayment for wages, therefore no entry required so answer is Nil

Hope that helps

Graham