insurance is paid for year end 30 sep 2007
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Explanation:
Under the accrual basis of accounting, expenses are matched with the related revenues and/or are reported when the expense occurs, not when the cash is paid. The result of accrual accounting is an income statement that better measures the profitability of a company during a specific time period.
In the given question Rs. 2400 paid for the year ended on 30th September 2012 in which 9 months belongs to the accounting period ended on 2012 and Rs. 3200 for 30th September 2013 in which 3 months belongs to the accounting period ended on 2012.
Hence insurance premium shown in P&L account would be as under:
=2400 X 9/12 + 3200 X 3/12
=2600
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