Accounting - Tab. Statement question

KarloM

If Insurance Prepaid in the balance sheet at the start of the year (1/1/2000) is €700:

"Received a bank statement on May 31 showing a direct debit of €1,800 to cover fire insurance for year ended 31/5/2001"

From this I would say that they paid a year's premium at €150 per month.
This would mean that they would have five months of the next year prepaid at 150 per month => €750 prepaid PLUS the €700 they had already prepaid
= €1450 prepaid.

The marking scheme shows the company ending up with just the €750 prepaid, implying that the original prepayment plus the €1,800 brought them up to May '01 but if this was the case, how can they calculate that it should be €150 per month as the €1,800 would not have been for a full year?

If anyone follows this, please reply.

Rob30888

You've worded that really badly, but if I follow, the £800 at the start would have been used up from 1-1-00 to 31-5-00, therefore meaning it's now gone and the only thing that needs to be dealt with is the £750 prepaid for next year. I hope that's clear!

x_TC_x

Yay, its all ahead of me yet :rolleyes: x