Accural Accounting

Question 1

Prepaid expense- classification and definition

Answer 1

Current asset

Expenses that have been paid for in advance but not yet consumed

Question 2

Prepaid expense- general journal entry

Answer 2

Dr- rent expense

Cr- prepaid rent

Question 3

Prepaid expense- balance sheet entry

Answer 3

Current prepaid account balance

Leftover balance

Question 4

Accused expense- classification and definition

Answer 4

Current liability

Expenses that have been consumed but not yet paid for

Question 5

Accured expense- general journal entry

Answer 5

Dr- expense account

Cr- accured expense

Question 6

Unearned income- classification and definition

Answer 6

Current liability

Income that we have received but the work has not yet been performed

Question 7

Unearned income- general journal entry

Answer 7

Dr- unearned income

Cr- income account

Question 8

Accured income- classification and definition

Answer 8

Current asset

Income where we have done the work but not yet been paid for

Question 9

Accured income- journal entry

Answer 9

Dr- accured income

Cr- income account

Question 10

General journal

Answer 10

The amount consumed (expense)

Question 11

Balance sheet

Answer 11

Amount leftover

Question 12

Asset definition

Answer 12

An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity

Question 13

Asset framework

Answer 13

• probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably
• when expenditure has been incurred for which it is considered improbable that economic benefits will flow to the entity beyond the current accounting period

Question 14

Liability definition

Answer 14

Is a present obligation of the entity resulting from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits

Question 15

Liability recognition

Answer 15

Probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at which the settlement will take place can be measured reliably

Question 16

Equity definition

Answer 16

Is the residual interest in the assets of the entity after deducting all its liabilities

Question 17

Income definition

Answer 17

Increases in economic benefit during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants

Question 18

Income recognition

Answer 18

Recognised when an increase in future economic benefits related to an increase in asset or a decrease of a liability has arisen that can be measured reliably

Question 19

Expense definition

Answer 19

Decreases in economic benefits during the accounting period in the form of outflows or deletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants

Question 20

Expense recognition

Answer 20

When a decrease in future economic benefits related to a decrease in an asset or a liability has arisen that can be measured reliably
Occurs simultaneously with the recognition of an increase in liabilities or a decrease in assets

Question 21

Accrual accounting

Answer 21

Is where revenue and expenses are recorded when they are incurred, not when they are paid for
Eg. Income is recorded when earnt not when payment is received