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Katy started trading on 1 January 2020
Katy started trading on 1 January 2020. Her first set of accounts will cover the year to December 2020. She immediately entered into an 18-month lease for rent and had to pay the whole amount of £45,000 on 1 January 2020. She also entered into an agreement with an advertising agency who will provide her with promotional materials for a cost of £8,800 per year. This amount is to be paid in arrears in two equal instalments on 1 July 2020 and 1 January 2021.
Required:
Prepare ledger accounts for rent and advertising for the year ending 31 December 2020 clearly showing the income statement charges for these expenses.
Expert Solution
Solution :-
| DEBIT | AMOUNT £ | CREDIT | AMOUNT £ |
| Prepaid Rent Account | |||
| 1-Jan-20 | 45000 | 31-Dec-20 | 30000 |
| Closing Balance | 15000 | ||
| Rent Expense Account | |||
| 31-Dec-20 | 30000 | Income Summary | 30000 |
| Advertising Expense Account | |||
| 1-Jul-20 | 4400 | Income Summary | 800 |
| 31-Dec-20 | 4400 | ||
| Total | 8800 | Total | 8800 |
| Accrued expenses- Advertising Account | |||
| 31-Dec-20 | 4400 |
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