5. Accounting Adjustments

Question 1

Depreciation

Answer 1

Process of apportioning the cost of a non0current asset to the periods benefiting from its use

Question 2

What is depreciation stated as in an income statement?

Answer 2

Expense

Question 3

What is amortisation for intangible assets?

Answer 3

Accumulated depreciation records the total depreciated over life of the asset in the statement of financial position

Question 4

Two depreciation methods

Answer 4

Straight line

Reducing balance

Question 5

Net Book Value = ?

Answer 5

Cost Less Accumulated Depreciation

Question 6

Straight Line Method Equation

Answer 6

C - RV // T

Cost
Less Residual Value
Times Expected Use

Question 7

Describe depreciation trend over a few years

Answer 7

Reduces over time - NBV never reaches zero

Question 8

If an electricity bill is not accounted for, how is it accrued?

Answer 8

Increase electricity expense on income statement

Increase current liabilities in the statement of financial position

Question 9

How are prepayments adjusted?

Answer 9

Decreasing expense in the income statement

Increasing current assets in the statement of financial position

Question 10

4 approaches to inventory

Answer 10

1. Actual price of each item to find value of closing sotcck if the items are easily identifiable
2. First inventory made if used first
3. Last inventory made is used first
4. Pooled inventory and given an average price

Question 11

FIFO

Answer 11

First In, First Out

Question 12

LIFO

Answer 12

Last In, First Out