Question 4.5: Suppose that the vehicle expenses included in the account sh...

Accounting for Business Students

Suppose that the vehicle expenses included in the account shown in Example 4.3 had not included the cost of servicing, which was completed, but not billed, on 6 January. The cost was $250. This needs to be included as an expense, but also shown as a liability—accrued vehicle expenses—in the balance sheet. This would be journalised as follows:

Date	Account name and narrative reference	Folio	Debit side	Credit side
January 7	Vehicle expenses		250
	Accrued vehicle expenses (Townsend Servicing)			250
	Increasing vehicle expense by the amount unpaid. Setting up an accrual for the amount due to Townsend Servicing
January 7	Profit and loss—vehicle expenses		300
	Vehicle expenses			300
	Being the closing off of the vehicles expense account to the profit and loss account

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