...................................................30/9/06.......30/9/07.....
.......................................................N.............N.........
Accrued insurance premium........600...........710.......
Prepaid rent income....................490............630......
The cash book includes N1,850 and N,2,100 with respect to insurance premium and rent income respectively.
The insurance premium to be taken to the profit and loss account would be.
N1,310
N1,850
N1,990
N2,210
Correct answer is A
The insurance premium to be taken to the profit and loss account will be the amount which could not be recovered by the trader on account of credit sales. It is a business loss, so is debited in the profit and loss account.
Insurance premium posted to the P/L account would be;
710 + 600 = 1310