Now let us consider the year to 30/6/08.
[{m}.{s}a]
Let us look at the opening position in our T accounts.
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[{m}.{s}b]
Our T accounts show the opening accrual of £400 due for the months March - June 2007. Let us start by reversing this opening accrual.
The balance on the Accruals account is now cleared to zero - it will remain at zero until we enter the accruals at the year end.
The next event to affect the Rent account is the payment of £1,200 on 15 July 2007.
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[{m}.{s}d]
Note that the balance on the Rent account is now £800, - the amount paid £1,200 has been reduced by the amount that was due for the previous year £400.
There are no further entries in the Rent account until the year end. We must now consider the accrual/prepayment position at 30 June 2008.
The rent paid in the year covers the period up to 28/2/08. Rent is due for March - June 2008.
£1,260 is paid in August 2008, for the year March 2008 - February 2009.
Accrued rent at 30/6/08 is £420.
Our adjustment to record the accrual at 30/06/08 is:
The balance in the Rent account will now be transferred to the profit and loss account for the year to 30/6/08.
The balance in the Accruals account will be included in the balance sheet at 30/6/08.
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[{m}.{s}f]
We again check the balances in these accounts.
[{m}.{s}g]
07/08 rent expense:
Balance sheet 30/6/08