Accounting Online Program Certification Practice Test

What is the total electricity charge to be included in the statement of profit or loss for the year ended 31 December 20X7?

1. £3,215

2. £3,515

3. £3,420

4. £3,710

The correct answer is: £3,515

To determine the total electricity charge to be included in the statement of profit or loss, it is essential to consider all relevant electricity expenses incurred during the reporting period. This charge typically encompasses the electricity consumed, along with accounting for any outstanding bills or prepaid amounts at the beginning or end of the period. The total charge is calculated by taking into account the actual utility bill for the year, adjusting for any additional charges that may arise from previously unpaid bills or any adjustments made due to overestimation in prior periods. In this case, if option B represents £3,515 as the total charge, it likely reflects all cumulative electricity expenses accurately calculated, along with any adjustments required to present the total expense for the financial year properly. This ensures that the figure reported represents the actual consumption and related expenses without any omissions, complying with the accrual accounting principle, which dictates that expenses should be recognized in the period they are incurred regardless of when the payment is made. Thus, the correct charge included in the statement of profit or loss is logically derived as it encompasses all pertinent electricity costs relevant to the financial activities of the entity for the year ended 31 December 20X7.