Josh Has Been Trading for One Year as at 31

question 1

Multiple Choice

Josh has been trading for one year as at 31 December 2024 and during that year he paid electricity bills amounting to £760. On 14 January 2025 he received an electricity bill for the three months to 31 December 2024 for £310. He eventually paid the bill on 31 January 2025. His accounts for the year ended 31 December 2024 should show:

• A) A statement of profit or loss charge for electricity of £1,070 and an accrual of £310 on the statement of financial position.
• B) A statement of profit or loss charge for electricity of £760 and an accrual of £310 on the statement of financial position.
• C) A statement of profit or loss charge for electricity of £1,070 and a prepayment of £310 on the statement of financial position.
• D) A statement of profit or loss charge for electricity of £760 and a prepayment of £310 on the statement of financial position.

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Definitions:

Special Dividend

A one-time distribution of earnings to shareholders, oftentimes an indication of excess cash the company wants to return.

Homemade Dividend

A concept where investors create their own dividend policy by selling a portion of their portfolio of equities instead of relying on company-issued dividends.

Liquidating Dividend

A type of dividend paid by a company that is returning a portion of the capital to its shareholders, typically during dissolution.

Price/earnings Ratio

The Price/Earnings Ratio (P/E Ratio) is a valuation metric that compares the current share price of a company to its per-share earnings, used by investors to evaluate the investment attractiveness of a company.