Accounting Online Program Certification Practice Test

How much accrual will Redman plc need to include in its statement of financial position at 30 April 20X2?

1. £5,500

2. £10,000

3. £7,500

4. £8,000

The correct answer is: £5,500

To determine the accrual Redman plc needs to include in its statement of financial position at 30 April 20X2, it’s important to understand what accruals are. Accruals are accounting adjustments made to account for revenues that are earned or expenses that are incurred but have not yet been received or paid. This principle is fundamental in creating a more accurate picture of a company's financial performance. Assuming that the needed accrual information was provided elsewhere in the context of the question, the correct amount of £5,500 represents either unbilled revenue or expenses that have incurred but not yet recorded in the financial statements. This amount must be included in the financial position to ensure that all obligations and assets are properly reflected, thereby adhering to the accrual basis of accounting. The accuracy of this figure is critical for providing stakeholders with a reliable view of Redman plc’s financial health. Adjusting the accounts with the correct accrual amount ensures that the income statement reflects the income and expenses in the correct accounting period, thereby complying with accounting standards. Understanding these concepts allows one to realize that the figure provided is not just a simple number, but an essential component of ensuring the financial statements represent a true and fair view of the company's financial