10-02-2009, 05:31 PM
how can i put these prepaid expense in income statement when i dont know that these are consumed or not?. if the expenses were consumed than it is so easy when they are not than how is this possible to treat these as expense for current accounting period?..
as far i have learnt, there are two treatments to deal with prepaid expenses. first is to take it as current asset (dr) and credit the cash or bank account..and at year end pass an adjusting entry with the amount being consumed during the year as an expense.
2nd treatment is to charge the whole amount as expense but still in the end have to pass the adjusting entry..so in the question author did not mentioned that these expenses are consumed or not..at same author did not mentioned those owing expense rs.150 in income statement, and he treated those prepaid expenses in income statement and answer is 1415 net profit..is there any logic? this question is from the book prncipal of accounting by m.a ghani, .. i dont find this book useful for students as here in bwp ppl realy need for a change, regarding adopting foreign authors or atleast indians. i blv i cannot have concepts through ths books ya but if i got the key book than i might be able to solve the questions, as every student in here do so. any ways thanks for your reply. assalamualykum
as far i have learnt, there are two treatments to deal with prepaid expenses. first is to take it as current asset (dr) and credit the cash or bank account..and at year end pass an adjusting entry with the amount being consumed during the year as an expense.
2nd treatment is to charge the whole amount as expense but still in the end have to pass the adjusting entry..so in the question author did not mentioned that these expenses are consumed or not..at same author did not mentioned those owing expense rs.150 in income statement, and he treated those prepaid expenses in income statement and answer is 1415 net profit..is there any logic? this question is from the book prncipal of accounting by m.a ghani, .. i dont find this book useful for students as here in bwp ppl realy need for a change, regarding adopting foreign authors or atleast indians. i blv i cannot have concepts through ths books ya but if i got the key book than i might be able to solve the questions, as every student in here do so. any ways thanks for your reply. assalamualykum
