This set covers classifying adjustments, working out accruals and prepayments from figures and dates, income received in advance, expense ledger accounts, adjusted profit and a short statement of financial position extract. All businesses and figures are fictional and written for this page.
Work on paper first, with a ruled ledger where one is needed. Open each answer only after you have written yours, then compare line by line, not just the final figure.
The questions are ordered from easier to harder. The double-entry and ledger trainer can help you test an entry, and the percentage-base explorer is there if you want to check a share of a year.
Questions and worked answers
Question 1. Say whether each item at the year end is an accrued expense, a prepaid expense or income received in advance. (a) The December water bill arrives in January. (b) Insurance was paid for 12 months from 1 October. (c) A tenant pays rent for next year’s months. (d) Wages for the last week of the year are paid in the first week of January.
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(a) Accrued expense: the water was used in the year but not paid. (b) Prepaid expense: part of the cover is after the year end. (c) Income received in advance: money received for a service not yet given. (d) Accrued expense: the work was done in the year but paid later.
Question 2. Cafe Mutiara paid RM 5,400 for rates during the year. RM 600 of this was for next year. Find the rates expense for the year.
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The amount for next year is taken out. 5,400 − 600 = RM 4,800. The RM 600 is a prepayment, a current asset.
Question 3. Kedai Tulus paid RM 1,980 for telephone during the year. A bill of RM 165 for December was unpaid at the year end. Find the telephone expense and state where the RM 165 appears in the statement of financial position.
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The unpaid bill is added. 1,980 + 165 = RM 2,145. The RM 165 is an accrued expense, shown under current liabilities.
Question 4. A bakery paid an insurance premium of RM 3,600 on 1 June 2025 for 12 months. The year end is 31 December 2025. Find the expense and the prepayment.
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Monthly cost = 3,600 ÷ 12 = 300. Used: June to December, 7 months, so expense = 300 × 7 = RM 2,100. Remaining: January to May 2026, 5 months, so prepayment = 300 × 5 = RM 1,500. Check: 2,100 + 1,500 = 3,600.
Question 5. Studio Warna received RM 2,400 on 1 October 2025 for 8 months of room hire, covering October 2025 to May 2026. The year end is 31 December 2025. Find the income for the year and the income received in advance.
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Income per month = 2,400 ÷ 8 = 300. Earned: October, November and December, 3 months, so income = RM 900. Remaining: January to May, 5 months, so advance = 300 × 5 = RM 1,500. Check: 900 + 1,500 = 2,400. The RM 1,500 is a current liability.
Question 6. Kedai Tulus has an electricity account with an opening accrual of RM 210. During the year it paid RM 2,640. At the year end RM 260 is owed. Write the electricity account and find the expense.
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Expense = 2,640 − 210 + 260 = RM 2,690.
| Debit | RM | Credit | RM |
|---|---|---|---|
| Bank | 2,640 | 1 Jan Balance b/d | 210 |
| 31 Dec Balance c/d | 260 | 31 Dec Income statement | 2,690 |
| 2,900 | 2,900 | ||
| 1 Jan Balance b/d | 260 |
Both sides total RM 2,900.
Question 7. A business has profit before adjustments of RM 41,500. It then finds wages owing of RM 900, insurance prepaid of RM 400 and rent income received in advance of RM 600. Find the adjusted profit.
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Wages owing lowers profit: − 900. Insurance prepaid raises profit: + 400. Income received in advance lowers income and profit: − 600. 41,500 − 900 + 400 − 600 = RM 40,400. Check the net change: −900 + 400 − 600 = −1,100, and 41,500 − 1,100 = 40,400.
Question 8. The expense for stationery was RM 7,200. The opening prepayment was RM 500 and the closing prepayment was RM 800. Find the cash paid.
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Cash paid = expense + closing prepayment − opening prepayment = 7,200 + 800 − 500 = RM 7,500. Check: 7,500 + 500 − 800 = 7,200, which is the expense.
Question 9. At the year end a business has trade receivables RM 6,000, bank RM 9,000, a prepayment of RM 400, trade payables RM 3,500, accrued expenses RM 900 and income received in advance RM 600. Find total current assets, total current liabilities and working capital.
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Current assets: 6,000 + 9,000 + 400 = RM 15,400. Current liabilities: 3,500 + 900 + 600 = RM 5,000. Working capital = 15,400 − 5,000 = RM 10,400. The prepayment is an asset, and both the accrual and the income in advance are liabilities.
Question 10. Bakeri Cahaya has a year end of 31 December 2025. The trial balance gives revenue RM 85,000, wages RM 30,000, rent RM 12,000, insurance RM 2,400 and electricity RM 3,900. Notes: (i) wages of RM 1,200 are owing; (ii) rent includes RM 1,000 for January 2026; (iii) the insurance premium of RM 2,400 was paid on 1 August 2025 for 12 months; (iv) electricity of RM 500 is owing. Prepare the adjusted expenses and the profit for the year, and state total prepayments and total accruals.
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Wages: 30,000 + 1,200 = 31,200. Rent: 12,000 − 1,000 = 11,000. Insurance: monthly cost = 2,400 ÷ 12 = 200. Used: August to December, 5 months, so expense = 1,000 and prepayment = 200 × 7 = 1,400. Electricity: 3,900 + 500 = 4,400.
Total expenses = 31,200 + 11,000 + 1,000 + 4,400 = RM 47,600. Profit = 85,000 − 47,600 = RM 37,400.
Total prepayments = 1,000 + 1,400 = RM 2,400. Total accruals = 1,200 + 500 = RM 1,700.
Check: unadjusted expenses are 30,000 + 12,000 + 2,400 + 3,900 = 48,300, so unadjusted profit is 36,700. Net adjustments are −1,200 + 1,000 + 1,400 − 500 = +700, and 36,700 + 700 = 37,400.
If you got these wrong
Look at the type of error, not only the number. Each row points to the lesson that rebuilds the idea.
| What went wrong | Where to go |
|---|---|
| Used cash paid as the expense, or could not decide which year an item belongs to | Allocate an expense to the correct period |
| Counted months wrongly, or reversed expense and prepayment | Calculate a prepaid amount from dates |
| Treated an advance receipt as income or as an asset | Treat income received in advance |
| Adjusted profit but the statement of financial position will not balance | Adjust a statement after an accrual |
| Opening balances moved in the wrong direction, or a ledger account will not agree | Separate cash paid from expense recognised |
If you wrote an entry on the wrong side, go back to double-entry foundations. Record repeated slips in the mistake log and retest queue and try a fresh question a few days later.
Where to go next
Return to the module overview for the full route, or move on to receivables and allowances. Students who want someone to watch the working as it happens can look at online one-to-one Accounting tuition.