PRC-1 · Chapter 4 · Question 3 of 100
At the start of the year, 'Prime Retailers' had an accrued electricity balance of Rs. 40,000. During the year, cash paid for electricity was Rs. 500,000. At the year-end, the accrued electricity bill was Rs. 60,000. What is the total electricity expense to be charged to the statement of profit or loss?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 520,000
Explanation
The expense is calculated by taking the cash paid (Rs. 500,000), deducting the opening accrual which relates to the previous year (Rs. 40,000), and adding the closing accrual which relates to the current year (Rs. 60,000). 500k - 40k + 60k = Rs. 520,000.
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