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ACCA Applied Knowledge · Financial Accounting · General ledger accounts and journal entries

At the start of the year, Kestrel Ltd had an accrued rent expense of $1,200 brought forward. During the year it paid $14,400 in rent. At the year end, rent of $1,500 was accrued. What is the rent expense in the statement of profit or loss?

The rent expense is $14,700. Cash paid of $14,400 is reduced by the opening accrual of $1,200, which relates to the prior year, and increased by the closing accrual of $1,500, which relates to the current year.

  1. A$14,700Correct
  2. B$14,100
  3. C$17,100
  4. D$15,900

Explanation

Expense = cash paid - opening accrual + closing accrual = 14,400 - 1,200 + 1,500 = $14,700. Option $14,100 reverses both adjustments, and $15,900 ignores the opening accrual.

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