FA2 Accruals and Prepayments

Mirchawala’s Hub of Accountancy
FA2:Accruals and Prepayments:
Question#1:
At 1 November 20X8, Borim had an accrual of $855 for fuel. During the year to 31 October20X9 he paid
invoices with a total value of $11,874.His closing accrual at 31 October 20X9 was $962.
What Is the charge for fuel In his statement of profit or loss for the year to 31 October 20X9_____?
Question#2:
Maureen had an opening accrual of $533 for telephone expenses. During the year she paid invoices with
a total value of $2,974. Her closing accrual was $488.
What is the correct charge for telephone expenses In Maureen's statement of profitor loss_____?
Question#3:
Sybil’s financial year ended on 30 November 20X2. She incurs the same telephone expense each month.
The last invoice paid for telephone calls was $1,800. This invoice covered the three months to 31
October 20X2.
What adjustment is required when preparing the accounts for the year to 30 November 20X2?
A. A prepayment of $600
B. A prepayment of $1,200
C. An accrual of $600
D. An accrual of $1,200
Question#4:
On 3 July 20X0 Alex paid rent of $18,000 for the period 1 July 20X0 to 30 June 20X1. He is drawing up
accounts for the year to 31 January 20X1.
In respect of the rent, his accounts should incude:
A. A prepayment of $7,500
B. An accrual for $7,500
C. A prepayment of $10,500
D. An accrual for $10,500
Question#5:
Matt’s financial year ended on 30 June 20X3.He pays the rental charge on his business’s premises
quarterly in advance. The rental expense is the same each quarter. The last payment was $3,600 and
this covered the three months to 31 August 20X3.
Matt’s account for the year ended 30 June 20X3 will include which of the following?
C. An accrual of $1,200
Question#6:
Which of the following statements about accruals are correct?
1. Accruals represent expenses that have not yet been paid.
2. Accruals have an effect on both the statement of profit or loss and the statement of financial
position.
3. If accruals exceed prepayments, the business is likely to go bankrupt and will need an allowance for
receivables.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1),(2) and 3
From the desk of Sir Mustafa Mirchawala Page 1

Question#7:
Vikki is preparing her final accounts for the year to 31 October 20X8. The most recent invoice in her
records for electricity was a charge of $1,647 for the three months to 31 August 20X8.
What post trial balance adjustment would Vikki make?
A. $549 prepayment
B. $549 accrual
C. $1,098 prepayment
D. $1,098 accrual
Question#8:
In the year to 30 November 20X6 Norah paid $1,765 for electricity. At 1 December 20X5 she had an
accrual of $264 for electricity. At 30 November 20X6 the accrual was $312.
What is the charge for electricity in Norah’s statement of profit or loss for the year to 30 November
20X6?
A. $1,189
B. $1,717
C. $1,813
D. $2,341
Question#9:
On 1 June 20X8, Suzy had an accrual of $422 for electricity. During the year she paid invoices with a total
value of $2,859,and received a refund of $86.
What balance should be included in Suzy’s trial balance at 31 May 20X9 for electricity expense?
A. $2,351
B. $2,523
C. $3,195
D. $3,367
Question#10:
Jerry has paid $11,040 for rent for the six month period to 31 August 20X2.
What accrual or prepayment is required when preparing accounts for the year ended 30 June 20X2?
C. An accrual of $1,840
Question#11:
Bethan’s account for the year ended 30 June 20X5 include an accrual for telephone expenses of $75.
During the year ended 30 June 20X6, she makes payments for telephone charges of $1,150, which
includes one invoice of $270 for the quarter ending 31 July 20X6
What will be the charge for telephone expenses in the statement of profit or loss for the year ended
30 June 20X6?
A. $1,075
B. $985
C. $895
D. $880
Question#12:
At this year-end, Keith had accrued expenses totaling $4,176 and prepaid expenses totaling $3,718.
How should the accrued and prepaid expenses be reported on Keith’s statement of financial position?
A. As a current asset of $458
B. As a current liability of $458

C. As a current asset of $4,176 and a current liability of $3,718

D. As a current asset of $3,718 and a current liability of $4,176
Question#13:
Which of the following statements is correct?
A. Accruals decreases profit
B. Accruals income decreases profit
C. A prepayment is a liability
D. An accrual is an asset
Question#14:
At 31 March 20X3, accrued rent payable was $300. During the year ended 31 March 20X4 rent paid was
$4,000, including an invoice for $1,200 for the quarter ended 30 April 20X4
What is the charge to profit or loss for rent payable for the year ended 31 March 20X4?
A. $3,300
B. $3,900
C. $4,100
D. $4,700
Question#15:
A company pays rent quarterly in arrears on 1 January, 1 April, 1 July and 1 October each year. The rent
was increased from $90,000 per year to $120,000 per year as from 1 October 20X2.
What rent expense and accrual should be included in the company's financial statements for the year
ended 31 January 20X3?
Rent expense Accrual
$ $
A. 100,000 20,000
B. 100,000 10,000
C. 97,500 10,000
D. 97,500 20,000
Question#16:
A business compiling its financial statements for the year to 31 July each year pays rent quarterly in
advance on 1 January, 1 April, 1 July and 1 October each year. The annual rent was increased from
$60,000 per year to $72,000 per year as from 1 October 20X3.
What figure should appear for rent expense in the business’s statement of profit or loss and other
comprehensive income for the year ended 31 July 20X4?
A. $69,000
B. $62,000
C. $70,000
D. $63,000
Question#17:
Dave Hull is preparing his final accounts for the year to 30 April 20X6. The last payment Dave made for
electricity was in March 20X6 when he paid $3,270 for the three months to 28 February 20X6.
What adjustment does Dave need to make when preparing his final accounts for the year to 30 April
20X6?
B. An accrual of $1,090
C. A prepayment of $2,180

Question#18:
In the year to 30 September 20X3 Rena paid a total of $2,850 for business car expenses. This includes
$350 which Rena paid from her personal funds. There was an opening accrual of $329 on the car
expenses account and the closing accrual was $464.
What is the charge for car expenses to be reported in Rena's statement of profit or loss for the year to
30 September 20X3?
A. $2,365
B. $2,635
C. $2,715
D. $2,985
Question#19:
Joan's draft final accounts were prepared including a prepayment for rent of $970. The prepayment
should have been $1,170.
When the error is corrected, how will the net profit be affected?
A. Net profit will decrease by $200
B. Net profit will increase by $200
C. Net profit will decrease by $1,170
D. Net profit will increase by $1,170
Question#20:
2012 Dr Cr Balance $
JAN 1 BALANCE 1000 DR
JAN 30 BANK 3000 4000 DR
MAY 27 BANK 3000 7000 DR
OCT 26 BANK 3200 10200 DR
DEC 31 INCOME STATMENT 12600 2400 CR
Which statement is correct?

A. Dixon always pays his rent in advance.
B. Dixon always pays his rent in arrears.
C. Dixon both pays and receives rent.
D. Dixon sometimes pays rent in arrears.

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Mirchawala’s Hub of Accountancy

FA2:Accruals and Prepayments:

From the desk of Sir Mustafa Mirchawala Page 1

From the desk of Sir Mustafa Mirchawala Page 2

C. As a current asset of $4,176 and a current liability of $3,718

From the desk of Sir Mustafa Mirchawala Page 3

Which statement is correct?

From the desk of Sir Mustafa Mirchawala Page 4

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