Accruals

Accrued expense
1 Rent of building is Rs. 300,000 per year. Mr. X paid Rs. 250,000 in 2019 and remaining
payment will be made in 2020. Pass necessary journal entries for the year 2019

2 A business pays salaries of Rs. 50,000 per month in arrears. During the year 2019,
Salaries for 11 months had been paid from the business bank account and 1-month salary
will be paid in next year. Pass necessary journal entries for the year 2019

3 Rent of building is Rs. 600,000 per year. Mr. X paid Rs. 500,000 in 2019 and remaining
payment will be made in 2020. Pass necessary journal entries for the year 2019

4 A business pays salaries of Rs. 100,000 per month in arrears. During the year 2019,
Salaries for 11 months had been paid from the business bank account and 1-month salary
will be paid in next year. Pass necessary journal entries for the year 2019

5 Akmal set up in business on 1 January 2019. The business has a 31 December year end.
The business acquired a shop on rent on 1 February. Rent is paid half yearly in arrears
Monthly rent is Rs. 20,000
Prepare rent expense account for the year ended 2019

6 Akmal set up in business on 1 January 2019. The business has a 31 December year end.
The business acquired a shop on rent on 1 February. Rent is paid half yearly in arrears
Monthly rent is Rs. 40,000
Prepare rent expense account for the year ended 2019

Effect on SOCI & SOFP

If not recorded (adjusted) Effect of adjustment/rectification
SOCI SOFP SOCI SOFP
↓ in
Accrued ↑ in net ↓ in net ↑ in current
↓ in exp current ↑ in exp
expense profit profit liability
liability
Accrued income
Questions:
1 Mr. X rents out part of its premises on an yearly rent of Rs. 150,000. Mr. X
received Rs. 130,000 from tenant in 2019 and remaining payment will be made in
2020.
Pass necessary journal entries for the year 2019
2 Mr. W receives interest of Rs. 10,000 on bank deposit for the month of December 2019 on
3rd January 2020. ABC LTD has an accounting year end of 31st December 2019.
Pass necessary journal entries for the year 2019

3 Mr. X rents out part of its premises on an yearly rent of Rs. 300,000. Mr. X
received Rs. 260,000 from tenant in 2019 and remaining payment will be made in
2020.
Pass necessary journal entries for the year 2019
4 Mr. W receives interest of Rs. 20,000 on bank deposit for the month of December 2019 on
3rd January 2020. ABC LTD has an accounting year end of 31st December 2019.
Pass necessary journal entries for the year 2019

5 Jugno developers has 31 December year end. It rents out its building on 1 June 19.
Rent is payable after 3 months in arrears and rent payment received in business
bank account in 2019 are as follows:
 31 August Rs. 9,500
 30 November Rs. 9,500
 The next rent receipt (at the end of February
2020) is expected to be Rs. 10,200 due to rise in
prices.
Prepare rent income account for the year ended 2019
6 Jugno developers has 31 December year end. It rents out its building on 1 June 19.
Rent is payable after 3 months in arrears and rent payment received in business
bank account in 2019 are as follows:
 31 August Rs. 19,000
 30 November Rs. 19,000
 The next rent receipt (at the end of February
2020) is expected to be Rs. 20,400 due to rise in
prices.
Prepare rent income account for the year ended 2019

Effect on SOCI & SOFP

If not recorded (adjusted) Effect of adjustment/rectification
SOCI SOFP SOCI SOFP
↓ in
Accrued ↓ in ↓ in net ↑ in ↑ in net ↑ in current
current
income income profit income profit asset
asset
Deferrals
Deferred Expenses

1 Mr. A acquired building on 1 July 2019 and paid a yearly rent of Rs. 450,000 in advance
on that date. The accounting year of Mr. A ends on 31 Dec.
Pass necessary journal entries for the year 2019

2 Mr. B obtained fire insurance policy on 1 Sep 2019 and paid annual insurance premium
of Rs. 360,000 on that date. The accounting year of Mr. B ends on 31 Dec.
Pass necessary journal entries for the year 2019

3 Mr. A acquired building on 1 July 2019 and paid a yearly rent of Rs. 900,000 in advance
on that date. The accounting year of Mr. A ends on 31 Dec.
Pass necessary journal entries for the year 2019

4 Mr. B obtained fire insurance policy on 1 Sep 2019 and paid annual insurance premium
of Rs. 720,000 on that date. The accounting year of Mr. B ends on 31 Dec.
Pass necessary journal entries for the year 2019

5 Mr. E prepare his accounts on 31 Dec each year. On 1-Mar-2019 he paid annual fire
insurance premium of Rs. 240,000 in advance
Prepare insurance expense account for the year ended 2019

6 Mr. E prepare his accounts on 31 Dec each year. On 1-Mar-2019 he paid annual fire
insurance premium of Rs. 480,000 in advance
Prepare insurance expense account for the year ended 2019
Deferred Income
1 Mr. T received advance rent from its tenant of Rs. 300,000 on 31st December 2019 in
respect of office rent for the 2020. Mr. T has an accounting year end of 31st December 2019.
Pass necessary journal entries for the year 2019 & 2020.

2 Mr. S received advance rent from its tenant of Rs. 120,000 on 1st September 2019 for next
12 months. Mr. S has an accounting year end of 31st December 2019.
Pass necessary journal entries for the year 2019 & 2020.

3 Mr. T received advance rent from its tenant of Rs. 600,000 on 31st December 2019 in
respect of office rent for the 2020. Mr. T has an accounting year end of 31st December 2019.
Pass necessary journal entries for the year 2019 & 2020.

4 Mr. S received advance rent from its tenant of Rs. 240,000 on 1st September 2019 for next
12 months. Mr. S has an accounting year end of 31st December 2019.
Pass necessary journal entries for the year 2019 & 2020.

5 Mr. P prepare his accounts on 31 Dec each year. Following transactions occur in relation
to rent income for the year 2019.
01-Jan Prepaid rent income Rs. 150,000
01-Mar Received annual rent Rs. 480,000 of building A in advance 01-
Jul Received annual rent Rs. 200,000 of building B in advance
Prepare rent income account for the year ended 2019

6 Mr. P prepare his accounts on 31 Dec each year. Following transactions occur in relation
to rent income for the year 2019.
01-Jan Prepaid rent income Rs. 300,000
01-Mar Received annual rent Rs. 960,000 of building A in advance 01-
Jul Received annual rent Rs. 400,000 of building B in advance
Prepare rent income account for the year ended 2019

Effect on SOCI & SOFP

If not recorded (adjusted) Effect of adjustment/rectification

SOCI SOFP SOCI SOFP
↓ in
Deferred ↓ in net ↑ in net ↑ in current
↑ in exp current ↓ in exp
expense profit profit asset
asset
↓ in
Deferred ↑ in ↑ in net ↓ in ↓ in net ↑ in current
current
income income profit income profit liability
liability
 Further Practice Questions
Q#01: Sales supplies purchased during the year Rs. 300 on cash and Rs 500 on credit. Unused sale supplies were of Rs.
200
Prepare expense account

Q#02: Stationery purchased during the year Rs. 200 on cash and Rs 800 on credit Unused stationery at year end was of Rs.
300 out of which items of Rs. 50 were damaged having no sales value
Prepare expense account

Q#03:Adeel Engineering has two motor vehicles that are used within the business. The expenses of
running these vehicles and insuring these vehicles are recorded in the “Vehicle running expenses”. At May
1, 2003 there are repair bills accrued of Rs. 4,780 and insurance that had been prepaid of Rs. 2,900.

During the year ended April 30, 2004 following transactions took place:
Date Description Rs.
Paid repair bills to workshop

Paid insurance for motor vehicles for the year to Aug 31, 2004
800

At April 30, 2004 there were repair bills unpaid totalling Rs. 3,560
Required:
Write up ledger accounts under single account system for the year ended April 30, 2004

Q#04:
Trial balance for the year ended 30 June
2014.
Inventory - 30 June 2013 570,000
Purchases 640,000
Purchase return

Discount received

Additional information:
Closing stock as on 30 June 2014 amounted to Rs. 237,500 thousand
Whereas NRV of closing inventory is Rs. 220,000
Required: Prepare extracts of SOCI & SOFP

Q#05:
Trial balance for the year ended 30 June 2014.
Inventory - 30 June 2014 70,000
Cost of sales 600,000
 Additional information:
Whereas NRV of closing inventory is Rs. 60,000
Required: Prepare extracts of SOCI & SOFP

Q#06:
A business has provided following extracts from trial balance as at 31 December 2018;
Debit Credit
Rs. in million
Administration expenses 150
Additional information
Electricity expense of Rs. 1.5 million is outstanding.
Included in the administration expenses in trial balance advance rent is Rs. 1.2 million.
Required:
Prepare extracts of SOCI & SOFP

Q#07:

The following is an extract from the trial balance of Qambar Enterprises (QE) as at 31 December 2018:
Debit

Credit Rs.
Office and sales supplies 210,000
Additional information:
Office and sales supplies costing Rs. 90,000 are still unused.
Required:
Prepare extracts of SOCI & SOFP

Q#08:
The following is an extract from the trial balance of Qambar Enterprises (QE) as at 31 December 2018:
Debit

Credit Rs.
Office and sales supplies 210,000
Additional information:
Office and sales supplies costing Rs. 90,000 are still unused. However, 30% of these supplies
are not usable due to deterioration in quality.
Required:
Prepare extracts of SOCI & SOFP

Q#09:
On December 31, 20X1, Kufas Corporation has one note receivable outstanding, a 120-day, 6%, $10,000.00 note
dated November 16, and one note payable outstanding, a 90-day, 6%, $12,000.00 note dated December 1.
1. Journalize the adjusting entries for accrued interest income and accrued interest expense on December 31.
2. Journalize the closing entries for interest income and interest expense.
3. Journalize the payment of cash for the maturity value of the note payable on March 1, 20X2. Check No. 478.
4. Journalize the receipt of cash for the maturity value of the note receivable on March 16, 20X2. Receipt No.
278.
5. List the amount of interest income from this note receivable that will be shown on the income statements
for 20X1 and 20X2.
6. List the amount of interest expense from this note payable that will be shown on the income statements for
20X1 and 20X2.
Q#10:
On December 31, 20X1, Craven, Inc., has one note receivable outstanding, a 90-day, 10%, $12,000.00 note dated
December 1, and one note payable outstanding, a 180-day, 5%, $20,000.00 note dated October 17.
1. Journalize the adjusting entries for accrued interest income and accrued interest expense on December 31
2. Journalize the closing entries for interest income and interest expense.
3. Journalize the receipt of cash for the maturity value of the note receivable on March 1, 20X2.
4. Journalize the payment of cash for the maturity value of the note payable on April 15, Check No. 512.
5. List the amount of interest income from this note receivable that will be shown on the income statements
for 20X1 and 20X2.
6. List the amount of interest expense from this note payable that will be shown on the income statements for
20X1 and 20X2.

Q#11:
1. Journalize the following transactions for Boje Law Firm.
Sept. 1. Signed a contract to provide legal services to Johnson Corporation for six months. Received cash in advance,
$12,000.00.
Dec. 31. Journalized the adjusting entry for legal services performed for Johnson Corporation.
2. Journalize the following transactions for Johnson Corporation.
Sept. 1. Signed a contract to receive legal services from Boje Law Firm for six months. Paid cash in advance,
$12,000.00.
Dec. 31. Journalized the adjusting entry for expense incurred for legal services provided by Boje Law Firm.

Q#12:
Journalize the following transactions for Smythe Manufacturing.
Nov. 1. Signed a contract to lease excess warehouse space to Fredrickson Company for six months. Received cash in
advance, $9,000.00.
Dec. 31. Journalized the adjusting entry for rent earned.
2. Journalize the following transactions for Fredrickson Company.
Nov. 1. Signed a contract to lease a warehouse from Smythe Manufacturing for six months. Paid cash in advance,
$9,000.00.
Dec. 31. Journalized the adjusting entry for rent expense.

Q#12:
Marboe Fitness Center began operations on November 1, 20X1. It sells yearly memberships for $600, which allow
the member full access to all exercise equipment in the center. By November 1, Marboe Fitness Center had sold 500
one-year memberships. Marboe Fitness Center also publishes a monthly magazine. By the end of November,
Marboe had sold 1,000 one-year magazine subscriptions for $36.00 each. The first issue of the magazine was
distributed on December 1, 20X1.
Instructions:
1. Journalize the adjusting entries for membership fees and magazine subscriptions earned.
2. What is the balance in the Unearned Membership Fees account? What does it represent?
3. What is the balance in the Unearned Magazine Subscriptions account? What does it represent?
4. Develop a method for Marboe Fitness Center to calculate the amount of revenue earned each month.

Q#13:
1. Dawes Advertising Company’s trial balance at December 31 shows Advertising Supplies $8,800 and
Advertising Supplies Expense $0. On December 31 there are $1,400 of supplies on hand. Prepare the
adjusting entry at December 31.
 2. On July 1, 2010, Noble Co. pays $10,800 to Russo Insurance Co. for a 2-year insurance contract. Both
companies have fiscal years ending December 31.Pass necessary adjusting entries for both.
3. (a) Interest on notes payable of $300 is accrued.
(b) Service revenue earned but unbilled totals $1,400.
(c) Salaries of $780 earned by employees have not been recorded.

Q#14:
The ledger of Buerhle, Inc. on March 31, 2010, includes the following selected accounts before adjusting entries.
Debit Credit
Prepaid Insurance 2,400
Office Supplies 2,500
Office Equipment 30,000
Unearned Revenue 10,000

An analysis of the accounts shows the following:

1. Insurance expires at the rate of $300 per month.
2. Supplies on hand total $900.
3. The office equipment depreciates $500 per month.
4. 2/5 of the unearned revenue was earned in March.
Prepare the adjusting entries for the month of March.

Q#15:
Jose Contreras is the new owner of Curveball Computer Services. At the end of July 2010, his first month of
ownership, Jose is trying to prepare monthly financial statements. He has the following information for the month.
1. At July 31, Contreras owed employees $1,100 in salaries that the company will pay in August.
2. On July 1, Contreras borrowed $20,000 from a local bank on a 10-year note. The annual interest rate is 12%.
3. Service revenue unrecorded in July totaled $1,600.
Prepare the adjusting entries needed at July 31, 2010.

Q#16:
Proctor Company accumulates the following adjustment data at December 31.
(a) Service Revenue earned but unbilled totals $600.
(b) Store supplies of $300 are on hand. Supplies account shows $1,900 balance.
(c) Utility expenses of $275 are unpaid.
(d) Service revenue of $490 collected in advance has been earned.
(e) Salaries of $800 are unpaid.
(f) Prepaid insurance totaling $400 has expired.
Instructions
For each item indicate (1) the type of adjustment (prepaid expense, unearned revenue,
accrued revenue, or accrued expense) and (2) the status of the accounts before adjustment (overstated or
understated).
Q#17:
The ledger of Thurston Rental Agency on March 31 of the current year includes these selected accounts before
adjusting entries have been prepared.

Q#18:
Q#19:

Q#20:
Q#21:
Q#22:
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Q#25:
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Q#27:
Q#28:
Q#29: