Accounting for Adjustments to the Trial Balance Flashcards
What kind of adjustments might need to be made to the trial balance?
Stock (inventory) and cost of sales, depreciation, accruals, prepayments, bad and doubtful debts
How can we calculate cost of sales?
Opening stock + purchases - closing stock
What is opening stock?
Stock left over from previous accounting period
What is closing stock?
Stock left at the end of the accounting period
What are alternatives for recording transactions and adjustments?
Posting stock to stock account then adjustment to cost of sales account
What could be used instead of column accounts?
Journal entries
What does depreciation represent?
The using up or consumption of a proportion of the future economic benefit of non-current (fixed) assets
Where is depreciation allocated?
As an expense in the current accounting period
What is straight line depreciation?
Equal amount of depreciation is treated as an expense in each accounting period
What type of balance is accumulated depreciation?
Cr balance as it reduces value of an asset in the balance sheet (NBV)
What type of balance is bad debt provision?
Cr balance as it reduces value of debtors in the balance sheet
How do we increase bad debt provision?
Dr Doubtful Debts Expense Account, Cr Bad Debt Provision
How do we decrease bad debt provision?
Cr Doubtful Debts Expense Account, Dr Bad Debt Provision
When should we do a bad debt write off?
When we are sure that a customer won’t pay
What are accruals?
Amounts owing at a point in time - bills for which have not been received at accounting year end
