Rosa paid 1200 on 1-7-09 towards yearly subscriptttion(july1,2009 to june30,2010) of a newspaper.it means she has to make adjustment of ----------------- expenses for finalisation of a/c for the year ended 31-3-10.
ans is300 as prepaid.
my question is how this is prepaid of 300.please explain this.
Yearly Subscripttion of Rs 1200 is paid from (July 2009 to June 2010).
Expenses for the accounting period (1st Apr 2009 to 31st Mar 2010) will be for 9 months [Jul 2009 to Mar 2010] - amount = 1200 * 9/12 = Rs 900
For the period of Apr 2010 to June 2010 the expense is already paid, which pertains to the next year. Amount is Rs 1200 * 3/12 = Rs 300.
Thus, Rs 900 is the expense during the year and Rs 300 is the prepaid expense.
Following the accrual basis of accounting for thr FY end 31.3.10 we can book expense of only 9 months ie from 1.07.09 -31.03.10.The rest paid for 3 monthe ie 100*3 will be treated as Prepaid expense.It will be accounted in the next FY in the books
1200*3/12=300
Since the ending 3 months for which its booked is out of the f.yr.....
1200*3/12=300
Since the ending 3 months for which its booked is out of the f.yr.....
she had paid amt for the year 1 july 2009 to 30 june i.e 1200 of this amt 3 months amt i.e. from 1 april to 30 june belongs to the next year therefore she has paid 3 months prepaid subscripttion(1200/12*3 = 300)
therefore she has paid 900 for current year and 300 prepaid for the next yr.
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