Tutorial 9 Year End Adjustments
5
Tutorial 9: Suggested solutions
Section A:
1. Accrued income is income/revenue earned/realised during the year, but
not yet received. Eg:- Commision for the year ended 31 Dec 2013 but
only received in Feb 2014. This should be included as year 2013
income and appear as a current asset in the SFP as at 31 Dec 2013.
Income in advance is income/revenue for following year that was not
yet earned/ realised during the year, but received in the current year.
Eg:- Rental income for Jan 2014 received in Dec 2013. This should be
excluded from year 2013 income and disclosed as a current liability in
th SFP as at 31 Dec 2013.
Accrued expenses are expenses incurred during the year but not yet
paid. Eg:- electicity bill for Dec 2013 that was only received and paid
in Jan 2014. This sgould be included as Dec 2013 expenses and
disclosed as a current liability in the SFP as at 31 Dec 2013.
Prepaid expenses are expenses for the following year paid in advance in
the current year. Eg :- Rental expense for Jan 2014 paid in Dec 2013.
This should be excluded from the 2013 expenses and disclosed as a
current asset in the SFP as at 31 Dec 2013.
2 (a) According to the Matching/Accruals Concept, the cost/expenses
incurred in an accounting period are matched with the revenue earned
in the same accounting period, regardless of the payment made or
revenue received. It should be stressed that only revenue and
cost/expenses that relate to that particular period should be matched. If
not, they should be excluded.
(b) Accrued income is income realised in this period but not yet
collected. It is an asset that is collectible within 12 months. Therefore,
it should be categorised under current asset in the SFP.
Income in advance is income for the following period but received in
this period. It is not yet realised. Therefore, it should be categorised as
current liability in the SFP.
3. RM1,800 covered Oct 2014 until Mar 2016 = 18 months
ie. RM100 per month
SPL = 12 months x RM100 = RM1,200
SFP = 3 months x RM100 = RM300 prepaid
4. (The two-stage method is used for this illustration).
Prepaid advertising Account
2
01
7
RM
20
1
7
RM
Jun
1
Bal b/d
1,280
Jun
1
Advertising
1,280
Advertising Account
20
1
7
RM
201
8
RM
Jun
1
Prepaid Advertising
1,280
201
8
May
30
Cash
/Bank
600
May
30
Accrued
Advertising
200
May
30
S
PL
2,080
(4xRM50)
2,080
2,080
Accrued advertising Account
201
8
RM
201
8
RM
May
30
Bal c/d
200
May
30
Advertising
200
Jun
1
Bal b/d
200
Tutorial 9 Year End Adjustments
6
Accrued rental received Account
20
1
7
20
1
7
Jun
1
Bal b/d
2,000
Jun
1
Rental received
2,000
201
8
201
8
May
30
Rental received
4,000
May
30
Bal
c/d
4,000
Jun
1
Bal b/d
4,000
Rent received Account
20
1
7
RM
201
8
RM
Jun
1
Acc rental received
2,000
May
30
Cash
10,000
201
8
May
30
Acc rental received
4,000
May
30
S
PL
12,000
(RM1,000 x 4)
14,000
14,000
Question 5
(a) i)
Rent Account
RM
RM
Mar
31
Bank
4,400
Mar
31
SPL
4,800
Balance c/d
400
4,800
4,800
ii)
Insurance Account
RM
RM
Mar
31
Bank
1,600
Mar
31
SPL
1,300
Bal c/d
300
1,600
1,600
20
1
7
RM
20
1
7
RM
Jun
1
Electricity
120
Jun
1
Bal b/d
120
201
8
20
1
7
May
30
201
8
May
30
S
PL
730
May
30
Prepaid electricity
150
1,000
1,000
201
8
201
8
May
30
May
30
Jun
1
Bal b/d
150
Bal c/d
350
1,600
4,000
RM
RM
S
4,800
(15 mth)
6,000
