Sedgemoor Allotment Growers lets plots to its members for a yearly rent. Some members pay late and others pay for the coming season early, so the amount ban...

Rent receivable is income, so its account works as the mirror image of an expense account. Amounts owed to the business at the year end are assets and amounts collected for a period not yet supplied are liabilities. The credit to the income statement is the rent earned in the twelve months, not the cash banked.

(a) Rent receivable account for the year ended 30 September 2024

Working for the income statement figure: credits total $415 + $9,860 + $340 = $10,615; the known debits are $270 + $290 = $560; the balancing debit is $10,615 - $560 = $10,055.

(b) The closing balances [4]

• Rent in arrears $340 is a debit balance, an other receivable, shown under current assets. [2]
• Rent received in advance $290 is a credit balance, an other payable, shown under current liabilities. [2]

(c) Why the rent credited to the income statement differs from the rent banked [4]

1. The income statement is credited with the rent earned for the twelve months of plot use, whoever has actually handed the money over during that time. [1]
2. Rent still owed at 30 September 2024 is added even though no cash arrived, because the plots were used. [1]
3. Rent paid early for the coming season is taken out again, because the association has not yet supplied that use. [1]
4. The opening balances are released for the same reason, so no season is counted twice or missed. The net effect is that the credit of $10,055 exceeds the $9,860 banked by $195. [1]

Exam reminder: on an income account the arrears sit on the debit side (a receivable) and the amounts in advance on the credit side (a payable), which is the opposite of an expense account.