Chapter 9. Other Payables and Other Receivables 9.1 Recording Accrued and Prepaid Expenses Expense Accounts Debit (+) Credit (-) Balance b/d [Prepaid expense] Balance b/d [Accrued expense] Cash/Bank/Other payable [Expense paid] Income statement [Expense incurred] Balance c/d [Accrued expense] Balance ¢/d [Prepaid expense] Recording in Statement of Financial Position: >> Prepaid expense : Current asset > Other receivables >» Accrued expense : Current liability > Other payables Example: Company Z has a balance of $3,000 in its prepaid rent account on 1 January 20X1. On 1 July 20X1, $12,000 rent was paid by cheque. The premise was rented at $1,200 per month. Prepare Rent Expense account for the year ended 31 December 20X1. Answer: Rent Expense A/C Date _| Details Debit Date _| Details Credit 20X1 $ 20X1 $ Jan1 | Balance b/d 3,000 | Dec 31| Income statement 14,400 (120012 months) Jul 1 | Bank 12,000 | Dec 31| Balance ¢/d 600 15,000 15,000 20X2 Jani | Balance b/d 600 Income Statement for the year ended 31 December 20X1 (extract) Less expenses: Rent expense $ 14,400 Statement of financial position at 31 December 20X1 (extract) Current asset Other receivables $ 6009.2 Recording Accrued and Prepaid Income Debit (-) Credit (+) Balance b/d [Accrued income] Balance b/d [Prepaid income] Cash/Bank/Other receivable Income statement [Income earned] [Income received] iv Balance c/d [Prepaid expense] Balance c/d [Accrued income] Recording in Statement of Financial Position: > Prepaid income : Current liability > Accrued income : Current asset Example: Company Z was owed $500 interest for the year ended 31 December 20X1. On 30 June 20X2, the company received a cheque of $2,000. At the end of the accounting period, $800 of interest income remains outstanding. Prepare Interest Income account for the year ended 31 December 20X2. Answer: Interest Income A/C Date | Details Debit | Date | Details Credit 20X2 $ 20X2 $ Jan 1 | Balance b/d 500 | Jun 30 | Bank 2,000 Dec 31) Income statement 2,300_| Dec 31] Balance c/d 800 2,800 2,800 20x3 Jan 1 | Balance b/d 300 Income Statement for the year ended 31 December 20X2 (extract) $ Other income: Interest income 2,300 Statement of financial position at 31 December 20X2 (extract) $ Current asset: Prepaid interest income 800