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CMA Foundation · Fundamentals of Financial and Cost Accounting · Adjustment Entries and Rectification of Errors

Gupta & Co. paid rent of Rs 66,000 during the year ended 31 March 2025. This included Rs 6,000 paid in advance for April 2025. Rent of Rs 5,000 for March 2024 had been outstanding at the start and was paid during the year, being included in the Rs 66,000. What is the rent charged to the Profit and Loss Account for the year?

Rent charged to the Profit and Loss Account is Rs 55,000. Start with cash paid of Rs 66,000, deduct Rs 5,000 paid for the previous year's outstanding rent and Rs 6,000 prepaid for next year, leaving only the current year's rent.

  1. ARs 55,000Correct
  2. BRs 60,000
  3. CRs 66,000
  4. DRs 61,000

Explanation

Rent expense = cash paid - opening outstanding paid - closing prepaid = 66,000 - 5,000 - 6,000 = 55,000. Check: 11 months at 5,000 from the prior year paid... the amount for the year works out to 55,000. Rs 60,000 ignores the opening outstanding and so is wrong.

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