Reference no: EM132760173
Three of the accounts in the ledger of Charlotte William indicated the following balances at 1 January 2020:
Insurance paid in advance £562;
Wages outstanding £306;
Rent receivable, received in advance £36.
During 2020 Charlotte:
Paid for insurance £1,019, by bank standing order; Paid £15,000 wages, in cash;
Received £2,600 rent, by cheque, from the tenant.
At 31 December 2020, insurance prepaid was £345. On the same day rent receivable in arrears was £105 and wages accrued amounted to £419.
Problem (a) Prepare the insurance, wages and rent receivable accounts for the year ended 31 December 2020, showing the year end transfers and the balances brought down.
Problem (b) Prepare the income statement extract showing clearly the amounts transferred from each above accounts for the year ending 31 December 2020.
Problem (c) Explain the effects on the financial statements of accounting for (i) expenses accrued and (ii) income received in advance at year end.
Problem (d) What are the purposes of accounting for (i) expenses accrued and (ii) income received in advance at the year end?
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