Three of the accounts in the ledger of John Dier indicated the following balances at 1 January 2013:

Insurance paid in advance K562 Wages outstanding K306 Rent receivable, received in advance K36 During 2013 John Dier:

i. ii. iii.

Paid for insurance K1,019 by bank standing order; Paid K15,000 wages in cash Received K2,600 rent by cheque from the tenant

At 31 December, insurance prepaid was K345.On the same day receivable in arrears was K105 and wages accrued amounted to K419.

a. Prepare the insurance, wages and rent receivable accounts for the year ended 31 December 2013, showing the year end transfers and the balances brought down.

b. Prepare the income statement extract showing clearly the amounts transferred from each of the above accounts for the year ending 31 December 2013.

c. Explain the effects on the financial statements of accounting for (1) expenses accrued and (2) income received in advance at year end.

d. What are the purposes of accounting for (1) expenses accrued and (2) income received in advance at year end.