Prepare accruals and prepayments for a business
In this assignment, you will have the opportunity to apply your knowledge of identifying and accounting for accruals and prepayments in a real-world scenario. Please read the scenario carefully and answer the questions accordingly.
Scenario:
You are working as an accountant for XYZ Company, a manufacturing business. The company’s financial year-end is on December 31st. As part of your role, you are responsible for preparing the year-end adjustments to ensure accurate financial reporting. You have been provided with the following information:
On December 31st, the company received an electricity bill for the month of December amounting to £1,200. The bill has not been paid yet.
The company provides services to clients on credit. On December 31st, there were outstanding invoices totaling £5,000 that have not been recorded as revenue.
The company has prepaid insurance coverage for the next six months. The total prepaid insurance amount is £3,600.
Assignment Questions:
- Calculate the year-end adjustment for the electricity bill.
- Calculate the year-end adjustment for the outstanding invoices.
- Calculate the year-end adjustment for the prepaid insurance.
- Provide the journal entries for each of the year-end adjustments.
Note: Show all calculations and provide explanations for your answers.
Submit your answers in the text box below.