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Accruals Prepayments
Refer to amounts which are NOT yet Refers to amount which are being
settled/owed, It is either NOT yet received paid/received in ADVANCE
or being paid for.
Lecture Example 1:
Mr John prepares its account each year to 31 December. Rent is paid for the business premises
6 month in advance on 1 April and 1 October each year. Recent rent payments and dates were
as follow:
Lecture Example 2:
Thomas operates from an outlet in Prangin Mall. On 1 January 2004, he rent out part of the shop
to a friend at an agreed rental of RM200 payable 3 months in arrears by four equal installments of
RM50. The first three rentals were received promptly on 30 March, 30 June and 30 Sept. The last
quarter rental was received on 3 January 2005.
Lecture Example 3:
The warehouse occupied by Alan is partially rented out to Samuel. For this Samuel pays annual
rent of RM1,000 for the year ended 31 December 2005. Samuel sent Alan 3 cheque as follow:
Lecture Example 4:
You are required to:
a. show how the items appear in the income statement
b. show how it will appear in the balance sheet
DR CR
Salaries 3,500
Rates 1,350
Commission 825
Interest 120
Rent 3,500
Rent received 250
Insurance 200
Format:
Cosmos
Income Statement for the year ended 31 December 2005
Sales X
(-) sales returns (X)
-----
X
Less: Cost of Sales
Opening Inventories X
Purchases X
(-) Purchase returns (X)
Carriage Inwards X
-----
X
(-) Closing Inventories (X) (X)
----- -----
Gross Profit X
Add: Income
Discount Received X
Rent received X X
-----
Less: Expenses
Rent X
Discount allowed X
Wages & Salaries X
Depreciation X
Carriage outwards X (X)
----- -----
Net Profit X
Copyright © Spencer Cheah
Page 4
DBFA 1513 Actg Methods 1
Final Accounts (Accruals & Prepayment)
===
Format:
Cosmos
Balance Sheet as at 31 December 2005
Buildings XX X XX
Motor Vehicle XX X XX
Furniture & Fittings XX X XX
-------- ---------- ----------
XX X XX
===== ====== ======
Current Assets
Inventories X
Receivables X
(-) Allowance for doubtful debts (X) X
------
Bank X
Cash X
-------
X
Current Liabilities
Payables X
Accruals X X
------- -------
Net Current Assets X
---------
XX
=====
Financed By;
Capital X
(+) Net Profit X
--------
XX
(-) Drawings (X)
Copyright © Spencer Cheah
Page 6
DBFA 1513 Actg Methods 1
Final Accounts (Accruals & Prepayment)
--------
XX
=====
Required;
Using an income statement, derive the gross profit amount.
Lecture Example 2:
Based on the information below, prepare an income statement and balance sheet for the
year ended 30 June 2005.