Chapter 11 Accruals and prepayments

What is prepaid expense?

• Business has incurred expense, but has not paid (still owe).

• Business has not incurred expense, but has paid.

What is accrued expense?

• Business has incurred expense, but has not paid (still owe).

• Business has not incurred expense, but has paid.

What is income received in advance?

• Business has earned the income, but has not received the money.

• Business has not earned the income, but has received the money.

What is income receivable/ accrued income?

• Business has earned the income, but has not received the money.

• Business has not earned the income, but has received the money.

On 1 January 2017, $14 000 cheque was paid for rental expense for 14 months.

How much rental expense was incurred for year ended 31 December 2017?

• $14 000

• $12 000

• $2 000

• $1 000

Business repaired 8 buses at a repair cost of $1000 per bus. A cheque of $6000 was paid on 31 December 2018.

State the account and amount to be recorded in the statement of financial position as at 31 December 2018?

• $8000 prepaid repairs expense

• $2000 prepaid repairs expense

• $6000 accrued repairs expense

• $2000 accrued repairs expense

On 1 June 2017, a cheque of $33,000 was paid for 10 months from 1 June 2017 to 31 March 2018. 2 months of rent was outstanding.

What is the account and amount to be recorded in the statement of financial position as at 31 May 2018?

• $3300 accrued rental expense

• $3300 prepaid rental expense

• $6600 accrued rental expense

• $6600 prepaid rental expense

An amount of $2350 commission income was received in 2018. An additional commission income of $470 was earned but not received.

How much commission income is earned for the year ended 31 December 2018?

• $2820

• $470

• $1880

• $2350

A landlord charges $200 rental per month. The landlord receives cheque $1400 during the year.

What is the account and amount shown in the statement of financial position?

• $1000 rental received in advance

• $1000 rental receivable/ accrued rent received

• $1400 rental received in advance

• $1400 rental receivable/ accrued rent received

For the year ended 31 March 2016, a business received commission income of $3000. Included in the amount was $200 for April 2016.

What is the commission income earned for the year ended 31 March 2016?

• $3000

• $3200

• $2800

• $200