2 responses to “A social club’s receipts and payments account for 1996 showed rent paid as $4,000. On 1 January 1996, rent owed by the club was $800. On 31 December 1996, rent owed by the club was $1,000. What is the amount charged for rent in the income and expenditure account for 1996?”

1. 

   Mumtaz

   Correct answer is 3800

   Reply
   1. 

      rikazzz

      To calculate the rent expense (amount charged) in the Income and Expenditure Account for 1996, we need to adjust the actual cash paid for rent with the outstanding rent at the beginning and end of the year.

      Given:
      Rent paid during 1996 (cash basis) = $4,000

      Rent owed on 1 January 1996 (opening outstanding) = $800

      Rent owed on 31 December 1996 (closing outstanding) = $1,000

      Formula:
      Rent Expense
      =
      Rent Paid
      +
      Closing Outstanding Rent
      −
      Opening Outstanding Rent
      Rent Expense=Rent Paid+Closing Outstanding Rent−Opening Outstanding Rent
      Substituting the values:
      Rent Expense
      =
      4
      ,
      000
      +
      1
      ,
      000
      −
      800
      =
      4
      ,
      200
      Rent Expense=4,000+1,000−800=4,200
      ✅ Answer:
      $4,200 is the amount charged for rent in the Income and Expenditure Account for 1996 (accrual basis).

      Reply