A trader has the following ledger account. | heat and light account | | | | | | | :--- | :--- | :--- | :--- | :--- | :--- | | | | \$ | | | \$ | | year 1 | | | year 1 | | | | January 1 | balance b/d | 400 | December 31 | income statement | 4850 | | December 31 | bank | 4200 | | | | | December 31 | balance c/d | $\underline{250}$ | | | | | | | $\underline{4850}$ | | | $\underline{4850}$ | | | | | year 2 | balance b/d | 250 | What does the balance on 1 January, year 2 represent?

Explanation

The balance on 1 January, year 2 represents the prepayment of heat and light, which is the balance carried forward from the previous year.