View the step-by-step solution to:

Question

Accruals & Prepayments Masha and the Bear Inc. had several expenses during 2018. Some of them were the below:

Expense Account US$ Electricity 6,500 Water 1,700 Salaries 180,000 It is now 15 February, and the accountant has to make some final entries before the financial records of 2018 are closed. She noted the below: 1. The audit of 2018 will start in the beginning of March. For the past two years the audit fee has been the same and it is expected to be the same for 2018 also. This has amounted to $5,000. 2. Electricity paid in 2018 did not include December 2018 (it was paid in January 2019) and the portion for this month was $500. 3. The water expense paid in January 2019 included also December 2018 which amounted to $300. 4. During the Christmas holidays, an employee requested an advance against his salary, i.e. to receive half of January 2019 salary in December. This amount was $1,500. Required: a. Explain what are accruals and give an example. (5 marks) b. Explain what are prepayments and give an example. (5 marks) c. Prepare the below accounts (taking also into account the notes) for 2018 indicating the amounts that should be reported in the Profit and Loss account, and Balance Sheet Account at the end of the year. You are required to present also extracts of the Profit and Loss account, and Balance Sheet Account for 2018.  Electricity  Water  Salaries  Audit Fees (

Top Answer

Accrued expenseisexpensewhich has been incurred but not yet paid.Expensemust be recorded in the accounting period... View the full answer

Capture.JPG

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question