Accounting homework help

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rajtastic
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#1
Report Thread starter 8 years ago
#1
I have to prepare financial statements for a public limited company for the period ended 31 march 2014 and one of the adjustments is:

No heat and lightning costs for the month of March 2014 have been recorded in the accounting records. The next quarter's invoice for heat and lightning is expected to be £4,500. Heat and lightning costs are included in the administration expenses.

How does this affect the balance sheet? Do I just just add £4,500 to accruals, or does it only affect the income statement?

Any help is much appreciated.
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RossSimmons
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It's an incomplete records question I'm guessing. Draw up an expense account and work back using open and closing figures to find your missing balance. Separate costs before you answer them. Is the question on an exam paper? Let me know and I can have a look at the full question

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Runninground
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#3
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It's simply an accrual. There is no payment for the last month in the year (March) so you need to accrue for it.

The quarters accrual is £4,500 and this covers 3 months (3 months = quarter of a year). You want to find one month so you will do £4,500/3 x 1 = £1,500

So your accrual will be £1500 which is Dr Light and Heat, Cr Accruals.

This will increase your current liabilities in the balance sheet, therefore reducing the balance sheet value. It will also increase your expenses therefore decrease your profit in the P&L.
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