Karima’s financial year ends on 31 December.
She maintains one combined account for rates and insurance.
On 1 January 20–4 she owed $560 for 4 months’ rates and had paid 6 months’ insurance, $580, in advance.
During the year ended 31 December 20–4 Karima made the following payments:

a. Prepare the rates and insurance account for the year ended 31 December 20–4. Balance the account and bring down the balances on 1 January 20–5.
b. Prepare relevant extracts from the statement of financial position on 31 December 20–4.
c. Explain why it is important to make adjustments for accrued and prepaid expenses at the end of the financial year.

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February 28 Rates for 8 months by cheque 1120 April 30 Rates for 5 months by cheque 700 July 1 Insurance for 12 months by credit transfer 1200