A business property is rented at £2,500 per month. During the year ended 31
December 2013 the business paid 15 months rent, 4 months of which related to rent
owing on 1 January 2013. One month’s rent was owing on 31 December 2013.

Question

(a) Explain what is meant by an accrual.

(b) What is the total of the rent expense to be shown in the income statement for the
year ended 31 December 2013?

(c) What information relating to rent would be shown in the statement of financial
position as at 31 December 2013?

Accepted Answer

(a) Accruals are additional expenses incurred during the financial period which have
neither been invoiced nor paid by the end of that period. They do not include ‘trade
payables’ which would have been invoiced in the normal way.

(b) The total rent shown as part of the expenses in the income statement is 12 × £2500 =
£30,000.

(c) In the statement of financial position, current liabilities will include an accrual for
£2,500, being the one month’s rent owing at the end of the year.

Question 3.st.3: A business property is rented at £2,500 per month. During th...

This Question has been Answered.

Already have an account?

Login

Related Answered Questions