Paloma runs a sole trader business as a hairdresser. She has certain expenses that she incurs...

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Paloma runs a sole trader business as a hairdresser. She has certain expenses that she incurs in running her salon, two of which are insurance and water. Her financial year runs from 1 April to 31 March. The following information is available regarding her water and her insurance in respect of the year ended 31 March 2011. Water Paloma received five water invoices (bills) during the prior 14 months. Details of these are as follows: Period from 1 February 2010 to 30 April 2010 - £450 Period from 1 May 2010 to 31 July 2010 - £425 • Period from 1 August 2010 to 31 October 2010-£395 Period from 1 November 2010 to 31 January 2011 - £425 Period from 1 February 2011 to 30 April 2011 - £480 • • Paloma received the water bills within two weeks following the end of the period they referred to. She paid all the water invoices by direct debit (direct payment from her business bank account) one week after receiving each invoice. She had an accrual for water of £300 on the statement of financial position as at 31 March 2010. Insurance The insurance company sent her a letter to tell her that the insurance premium for the year from 1 June 2010 to 31 May 2011 would be 10% higher than the equivalent for 1 June 2009 to 31 May 2010, which was £2,700. The insurance premium for each year is payable in advance on 1 June each year, by cash. b. c. d. Required: a. Calculate the accrual or prepayment in respect of water that would need to be included on the balance sheet (statement of financial position) as at 31 March 2011. Calculate the water expense for the year ended 31 March 2011. Calculate the accrual or prepayment in respect of insurance that would need to be included on the balance sheet (statement of financial position) as at 31 March 2011. Calculate the insurance expense for the year ended 31 March 2011. Paloma runs a sole trader business as a hairdresser. She has certain expenses that she incurs in running her salon, two of which are insurance and water. Her financial year runs from 1 April to 31 March. The following information is available regarding her water and her insurance in respect of the year ended 31 March 2011. Water Paloma received five water invoices (bills) during the prior 14 months. Details of these are as follows: Period from 1 February 2010 to 30 April 2010 - £450 Period from 1 May 2010 to 31 July 2010 - £425 • Period from 1 August 2010 to 31 October 2010-£395 Period from 1 November 2010 to 31 January 2011 - £425 Period from 1 February 2011 to 30 April 2011 - £480 • • Paloma received the water bills within two weeks following the end of the period they referred to. She paid all the water invoices by direct debit (direct payment from her business bank account) one week after receiving each invoice. She had an accrual for water of £300 on the statement of financial position as at 31 March 2010. Insurance The insurance company sent her a letter to tell her that the insurance premium for the year from 1 June 2010 to 31 May 2011 would be 10% higher than the equivalent for 1 June 2009 to 31 May 2010, which was £2,700. The insurance premium for each year is payable in advance on 1 June each year, by cash. b. c. d. Required: a. Calculate the accrual or prepayment in respect of water that would need to be included on the balance sheet (statement of financial position) as at 31 March 2011. Calculate the water expense for the year ended 31 March 2011. Calculate the accrual or prepayment in respect of insurance that would need to be included on the balance sheet (statement of financial position) as at 31 March 2011. Calculate the insurance expense for the year ended 31 March 2011.

Answer rating: 100% (QA)

Lets break down the information and calculate the accruals and expenses for both water and insurance Water a To calculate the accrual or prepayment fo... View the full answer