Day: December 23, 2019

If rent receivable has been prepaid to the extent of £75 at the end of a firm’s first financial year, the amount of rental income shown in its profit and loss account, relative to the amount of rent it received during the year, will be . . .

Select ONE answer:

1. the same.
2. £75 more.
3. £75 less.
4. None of the above.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct
   For example, if the rent receivable applicable to the year is £100 and £175 has been received, then, in accordance with the accruals concept, the amount to be shown in the profit and loss account is £100, £75 less than the amount received. This would be shown as follows:
   Rent Receivable Income (B/S)
   Dr Profit and Loss £100
   Dr Balance c/d £75
   Cr Bank £175
   Totals £175
4. Not correct

 

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