CAF-01: FAR-1 (Intro + FAR-1)
Accrual basis of accounting
Lecture # 1 (Accruals)
Lecture # 42 (Over All)
Homework Solution
Answer example - 10
Cash
Closing Payable
Interest Expense
10,000 P/L (bal.)
20,000
30,000
P/L Extracts
Admin Expenses
Interest on loan
30,000
B/S Extracts
Loan Payable
400,000
Interest payable on loan
20,000
Note:
Here closing payable is given so P/L will be balancing figure. P/L figure cannot be calculated first because
interest rate is not given.
Answer example - 11
Interest Expense
Cash
18,000 P/L
30,000
(300,000  10%)
Closing Payable (bal.)
12,000
P/L Extracts
Admin Expenses
Interest Expenses
30,000
B/S Extracts
Loan Payable
300,000
Interest on loan payable
12,000
Note:
Here rate of loan is given so it is assumed that it is outstanding till start of year. As interest rate is given and
cash paid is given in trial so closing payable will be balancing figure.
Answer example - 12
Cash
Rent payable (Closing Payable)
Rent Expense
90,000 P/L (bal.)
12,000
Dr.
12,000
Rent expense
Rent payable
P/L Extracts
Admin Expenses
Rent expense
102,000
Cr.
12,000
B/S Extracts
Current liability
102,000 Rent Payable
12,000
Insurance expense
84,000 P/L (bal.)
Prepaid insurance (Closing prepaid)
78,000
6,000
Answer example - 13
Cash
Umair Sheraz Utra, ACA
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CAF-01: FAR-1 (Intro + FAR-1)
Accrual basis of accounting
Dr.
6,000
Prepaid insurance
Insurance expense
P/L Extracts
Admin Expenses
Insurance expense
Cr.
6,000
B/S Extracts
Current asset
78,000 Prepaid insurance
6,000
Answer example - 14
Insurance expense
110,000 P/L (bal.)
Prepaid insurance (Closing prepaid)
(90,000/12  3)
Cash
Dr.
22,500
Prepaid insurance
Insurance expense
P/L Extracts
Admin Expenses
Insurance expense
87,500
22,500
Cr.
22,500
B/S Extracts
Current asset
87,500 Prepaid insurance
22,500
Answer example - 15
Insurance expense
50,000 P/L (bal.)
Prepaid insurance (Closing prepaid)
(24,000/6  2)
Cash
Dr.
8,000
Prepaid insurance
Insurance expense
P/L Extracts
Admin Expenses
Insurance expense
B/S Extracts
Current asset
42,000 Prepaid insurance
30.06.07
01.07.07
Rent expense - 2007
Opening prepaid
Cash (1,000  3) + (1,500  6)
Cash (2,000  6) + (2,000  3)
Closing payable
Umair Sheraz Utra, ACA
Cr.
8,000
Answer homework question 2 (Mr. Amjad)
Dr.
Rent expense – 2006
Opening prepaid
- Opening payable
30.06.06 Cash (500  6)
3,000 P&L (Bal.)
30.09.06 Cash (1,000  3)
3,000
3,000 Closing prepaid
Closing payable (1,000  3)
Dr.
42,000
8,000
12,000
18,000
-
8,000
Cr.
9,000
Cr.
Opening payable
P&L (Bal.)
3,000
21,000
Closing prepaid (2,000  3)
6,000
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