ACCA F3 Past Exam Accrual
A company receives rent from a large number of properties. The total received in the year ended 30 April 2006 was $450,000.
The following were the amounts of rent in advance and in arrears at 30 April 2005 and 2006:
| 30 April 2005 | 30 April 2006 | |
| Rent in advance | 300,000 | 270,000 |
| Rent in arrears (all subsequently received) | 400,000 | 440,000 |
What amount of rental income should appear in the company’s income statement for the year ended 30 April
2006?
Suggested solutions
| Rental Income | |||
| Rental in advance 06 | 270,000 | Rent | 450,000 |
| Rental in arrears 05 | 400,000 | Rental in advance 05 | 300,000 |
| Income Statement | 520,000 | Rental in arrears 06 | 440,000 |
| Total | 1,190,000 | Total | 1,190,000 |
Alternative solutions
RENT IN ADVANCE
| DEBIT | CREDIT | ||
| Rental in advance 05 | 300,000 | ||
| DIFFERENCE in advance | 30,000 | ||
| Rental in advance 06 | 270,000 |
RENT IN ARREARS
| DEBIT | CREDIT | ||
| Rental in arrears 05 | 400,000 | ||
| DIFFERENCE in arrears | 40,000 | ||
| Rental in arrears 06 | 440,000 |
RENTAL INCOME
| DEBIT | CREDIT | ||
| Rent received in 06 | 450,000 | ||
| DIFFERENCE in advance | 30,000 | ||
| DIFFERENCE in arrears | 40,000 | ||
| Answer | 520,000 |
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