1
Three of the accounts in the ledger of Charlotte Williams indicated the following balances
at 1 January 2010:
Insurance paid in advance £562;
Wages outstanding £306;
Rent receivable, received in advance £36.
During 2010 Charlotte:
Paid for insurance £1,019, by bank standing order;
Paid £15,000 wages, in cash;
Received £2,600 rent, by cheque, from the tenant.
At 31 December 2010, insurance prepaid was £345. On the same day rent receivable in arrears was
£105 and wages accrued amounted to £419.
(a) Prepare the insurance, wages and rent receivable accounts for the year ended 31 December
2010, showing the year end transfers and the balances brought down.
(b) Prepare the profit and loss account extract showing clearly the amounts transferred from each
of the above accounts for the year ending 31 December 2010.
(c) Explain the effects on the financial statements of accounting for (i) expenses accrued and (ii)
income received in advance at year end.
(d) What are the purposes of accounting for (i) expenses accrued and (ii) income received in
advance at year end?
(Edexcel Foundation, London Examinations: GCSE)