Reference no: EM132519832

John Phiri's business has an accounting year end of 31 December 2018. He rents factory space at a rental cost of K5,000 per quarter, payable in arrears.

During the year to 31 December 2018 his cash payments of rent have been as follows:

1. 31 March (for the quarter to 31 March 2018) K5,000
2. 29 June (for the quarter to 30 June 2018) K5,000
3. 2 October (for the quarter to 30 September 2018) K5,000
4. The final payment due on 31 December 2018 for the quarter to that date was not paid until 4 January 2019.

Required:

Question 1: Show the ledger accounts required to record the above transactions.

Question 2: Alex Mukanta pays the rental expense on his market stall in advance. He starts business on 1 January 2019 and on that date pays K1,200 in respect of the first quarter's rent. During his first year of trade he also pays the following amounts:

• 3 March (in respect of the quarter ended 30 June) K1,200
• 14 June (in respect of the quarter ended 30 September) K1,200
• 25 September (in respect of the quarter K1,400 ended 31 December)
• 13 December (in respect of the first quarter)

Required:

Calculate the balance carried forward as at 31 December 2019

Question 3: On 1 January 2019, Willy Mossop owed K2,000 in respect of the previous year's electricity. Willy made the following payments during the year ended 31 December 2019:

• 6 February K2,800
• 8 May K3,000
• 5 August K2,750
• 10 November K3,100
• At 31 December 2019, Willy calculated that he owed K1,800 in respect of electricity for the last part of the year.

Required:

Calculate the electricity charge to be included in the income statement.

Question 4: Describe what a cash flow statement is and explain the importance of a cash flow statement.