Page 71 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Dr Rent A/c Cr
Date Particulars Date Particulars
Dec 31 To Cash 22,000 By Balance c/d 24,000
Dec 31 To Rent O/s 2,000
24,000 24,000
To balance c/d 24,000

Total amount of the rent for 12 months in a year
= Amount of Rent paid for 11 months + Rent outstanding for one month
= 22,000 + 2,000
= 24,000

This has to be applied for all the outstanding expenses.
The effect of adjustments in the P & L A/c and Balancesheet
Dr Profit and Loss account for the year ended………….. Cr

To Rent paid 22,000
Add Rent O/s to (Ganesh) 2,000
To total rent 24,000

Balance sheet as on dated…………………..

Liabilities Assets
Rent O/s (Ganesh) 2,000

2. For Prepaid Expenses of the Business

Prepaid expenses: The benefit of some expenses already spent will be available in the next
accounting year, Such a portion of the expense is called pre-paid expense.

Example: Rent paid in advance for the next accounting year.
Prepaid Expenses Account Dr.
To Relating Expenses Account

The prepaid expenses are disclosed in the assets side of the Balance Sheet and on the other
hand, it will be subtracted from the relating expenses in the debit side of Trading and
Profit & Loss Account.

The non-life insurance premium of the firm is 100 p.m. Since 1st April, 2005, it has paid the
premium of 1,500 upto June, 2006.
For a year, the firm is expected to make the payment of 1,200 for 12 months, but has paid 300
additionally for the next three months. As far as 300, the firm has not availed the service which
is known as an unused service. The money paid for an unused service to the insurance company
is nothing but an asset. The enterprise's money is along with the insurance company; which is
known as debtor of the enterprise.

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