Question

Given the following expense/revenue and payments/receipts ...determine the requested balances. Insurance expense 25000 Rent Expense 18000 Interest Revenue 15000 Interest Expense 8000 Salary Expense 10000 The following balances are excerpted from the Company's balance sheet 12/31/2020 12/31/2019 Prepaid Insurance 1800 ? Prepaid Rent 2500 ? Interest Receivable ? 3800 Interest Payable ? 2800 9000 ? Salaries Payable Insurance premium paid? Rental payments? Interest Received? Interest Paid ? Salaries Paid? 22000 17000 14000 7200 11000

Answer 1

		12/31/2020 (Ending Balance )	12/31/2019 (Beginning Balance
Prepaid Insurance		1800	4800
Prepaid Rent		2500	3500
Interest Receivable		4800	3800
Interest Payable		3600	2800
Salary Payable		9000	10000

1) Prepaid expenses are expenses paid in advance , and as per Accrual system of Account , Expenses and Income are to be Recognise when they incurred ie only expenese of that year should be recognise . As they are preapid they becoxe the Assets and are shown under Current Assets in Balancesheet

Working

Refer the following t Accounts which of Balacesheet Item

	Debit	Prepaid Insurance		Credit
1/1/2020 Balance (25000-220000+1800)	4800
Cash (Insurance Premium Paid )	22000		Insurance Expesnes (Income Statement )	25000
12/31/2020 Balance	1800

Ending Prepaid = Beginning Prepaid + Premium paid During year - Transfer (recognised ) as Expense

1800=Beginning +22000-25000

Beginnig Prepaid Insurance =1800+25000-22000=4800

December Ending balances of 2019 will be opening balances of January 2020

2) Prepaid Rent

	Debit	Prepaid Rent		Credit
1/1/2020 Balance	3500
Cash ( Rent paid during year )	17000		Rent Expenses (Income Statement )	18000
12/31/2020 Balance	2500

Ending Prepaid Rent = Beginning Prepaid + Rent paid During year - Rent  Expense recognised

Beginnig Prepaid Rent =2500+18000-17000

=3500

• Receivables  are the income which is recogised as Income of the Year , but yet to realised in Cash , and are shown under current assets as receivable it will have debit balance

3) Interest Receivable

		Interest Receivable
	Debit			Credit
1/1/2020	3800
Interest Revenue (Income Recognised )	15000		Cash (Interest Received )	14000
Balance	4800

4) Payables are the laibility , against the expenses recognised but not paid , and will have credit balance

		Interest Payable
	Debit			Credit
			Balance	2800
Cash ( Interest Paid )	7200		Interest Expesnes ( Expenses incurred during year )	8000
			Balance (2800+8000-7200)	3600

5) Salary Payable

		Salary Payable
	Debit			Credit
			Balance (11000+9000-10000)	10000
Cash ( Liability being paid)	11000		Salary Expenses (Expenses Incurred during year )	10000
			Balance	9000

Ending Balance of Salary Payable  = Beginning Payable  + Expenses incurred during year - Expesnes paid

9000=Beginning Payable +10000-11000

Begining Payablee =9000+1000

=10000