ACCA Applied Knowledge · Financial Accounting · Incomplete records
Orrin's business paid rent of $9,600 in cash during the year. Rent prepaid at the start of the year was $1,200 and rent owing at the end of the year was $800. What rent expense should be charged to profit or loss?
The rent expense is $9,200. Cash paid of $9,600 is reduced by the $1,200 prepayment brought forward, which relates to the prior year, and increased by the $800 owing at the end, which relates to this year.
- A$11,600
- B$7,600
- C$9,200
- D$10,000Correct
Explanation
Expense = cash paid - opening prepayment + closing accrual = 9,600 - 1,200 + 800 = $9,200. Check by T-account: opening prepayment 1,200 + paid 9,600 = 10,800; less closing accrual effect gives expense 9,200 after adding 800 owed... correct figure is $9,200.
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