On October 2, 2012 it pays rent of $6,000 for the year ended 30/9/2013
What expense for rent should be shown in the income statement for the year ended 31/12/2012
and what accrual or prepayment would be shown in the statements of financial position as at
31/12/2012 the expenses, prepayments and accrual for rent are:
Three months to 31/12/2012: Expense = $6,000 x 3/12 = $1,500
Prepayment as at 31/12/2012 = $4,500
In the rent ‘T’ account, these results can be achieved as follows:
As at 31/12/2012, the correct expense is transferred to the income statement and this leaves $4,500
in the account. Which is carries down as a balance on the debit side. This is an asset and is a
prepayment.