Forums
Back
Financial statements with adjustments
Accountancy
How rs.18000 came on adjusting entries
Answers (7)
Best Answer
theee k
The premium amount is paid for the period 1/7/19-30/6/20 ~12months But the books are closed every March (i.e)Premium is paid in advance for 3 months So, The amount paid in advance=72000÷12�3=18000
72000 divide by 12 = amt of premiun for ome month, Multiply the same with 3 to find prepaid amount
Thread Starter
Vignesh PsvHere a premium amount refers to 3 months ?
No, insurance premium paid for 12 months.Prepaid expense is for 3 months. I hope it is clear
theee k
No, insurance premium paid for 12 months.Prepaid expense is for 3 months. I hope it is clear
Yeah , it's now clear thanks !
The insurance is paid for 12 months so For per month it's 72000/12=6000 We have to prepare the financial statements only for the current financial year which will end on 31st march so From 1st July to 31st March is 9 months I. E 6000Ã?9= 54000 And remaining 3 months is prepaid Hence 6000Ã?3=18000 Thats how its derived
