Accrual Basis for Rent Income and Receivable

Steps:

• Prior monthly rent is $800, so prior annual rent is 12 ×$800 = $9,600.
• New annual rent from 1 April 2020 is $9,600 × 1.05 =$10,080.
• Rent income for year ended 31 March 2021 is $10,080 (full year's accrual).
• Closing rent receivable is opening $800 +$10,080 income – $1,040 payments =$9,840.

Why D is correct:

• D shows rent income of $10,080 and closing receivable of$9,840, following accrual accounting principles where income is recognized when earned, not when received.

Why the others are wrong:

• A uses cash basis ($1,040 income,$0 receivable), ignoring accrual recognition.
• B understates income by not applying the 5% increase correctly.
• C miscalculates receivable by excluding the opening balance from the total owed.

Final answer: D