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WAEC Financial Accounting 2015 Question 18

Question 18

Accruals and Prepayments

Extracts from the books of a firm as at June 30, 2012 showed the following balances: Advertising Dr GH¢36,000; Electricity Dr GH¢60,000. Advertising was paid by cheque covering 12 monthly instalments ending March 31, 2012. Electricity was paid by cash covering 15 monthly instalments from March 1, 2011.
What was the amount charged to the profit and loss account in respect of advertising for the ended June 30, 2012?

  1. A.GH¢ 36,000.
  2. B.GH¢ 30,000.
  3. C.GH¢ 27,000.
  4. D.GH¢ 24,000.
Show the answer and explanation

Answer: A (GH¢ 36,000.)

Explanation

A full year of advertising is charged: 12 months × GH¢3,000 = GH¢36,000 (amount relating to the year plus the amount owing).