Day: July 29, 2023

Rent is paid by a business monthly in advance on the first day of each month.

The payments during this financial year have been as follows:

• up to and including 1 June £500 per month
• from 1 July thereafter £600 per month

Which amount(s) will appear in the accounts for the year ended 31 October?

Select ONE answer:

1. Profit and Loss Expense – £6,400 and SOFP – £600 prepayment
2. Profit and Loss Expense – £6,400 and SOFP – £600 accrual
3. Profit and Loss Expense – £6,400 and SOFP – NIL
4. Profit and Loss Expense – £7,000 and SOFP – NIL

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 – 8 months * £500 + 4 months * £600 – no SOFPT impact as paid in advance on the first day of the month.
4. Not correct

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