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income statement - annual rates?

  • 14-05-2011 7:51pm
    #1
    lightspeed
    Registered Users, Registered Users 2 Posts: 1,292 ✭✭✭


    Hi im studying an accountancy module for a business degree and i have my tests starting next week. I think i should be ok to pass but on the income statement i dont quite understand how to calculate annual rates applies to rent as the solutions i have looked at have different answers.

    The income statement im trying to do at the moment for the 31/03/08 looks like this under
    rent and rates : €50,000

    and then at the additional information section it says:
    Rates are paid each year on 31 December for the following year. The annual charge for rates is €13,000

    At rent and rates calculated for the expense its works out like this
    rent & rates :50,000 + 4000 = 54,000

    Can someone tell me why its 4000 and not 13,000?
    i saw a similar income statement and the annual amount for rates was €20,000 and the amount added was €10,000 so im at a loss as to how you calulate what figure that gets added to rent and rates?


Comments

  • #2
    smcgiff
    Closed Accounts Posts: 5,943 ✭✭✭smcgiff


    Not sure if all the required info is here.

    I think the key here may be that you need to calculate Rent and Rates separately and then add together.

    Also, keep in mind the date the rates are paid does not correspond with the accounting year, therefore what was paid at the end of December will be partially prepaid at the end of the financial year.


  • #3
    mari2222
    Registered Users, Registered Users 2 Posts: 568 ✭✭✭mari2222


    if the rates bill for the year 2008 was 13000 and was paid/due on 31 dec 2007, then only one-quarter of it was properly attributable to the yr/e 31/3/08 - the rest is a prepayment ..........


  • #4
    lightspeed
    Registered Users, Registered Users 2 Posts: 1,292 ✭✭✭lightspeed


    hi that makes sense and i actually think it might be a typo by the lecturer and that it should actually be 12,000 and not 13,000 as it should be 3250 if its a quarter payment of 13,000. There are some other definate typing errors in his notes and exam solutions such as slightly different figures in the trial balance than in the income statement.
    Thanks


  • #5
    smcgiff
    Closed Accounts Posts: 5,943 ✭✭✭smcgiff


    lightspeed wrote: »
    hi that makes sense and i actually think it might be a typo by the lecturer and that it should actually be 12,000 and not 13,000 as it should be 3250 if its a quarter payment of 13,000. There are some other definate typing errors in his notes and exam solutions such as slightly different figures in the trial balance than in the income statement.
    Thanks

    Also, if a prepayment I would have thought the solution would be something like 50,000 minus 9,000 and not plus to give the P&L figure.


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