Adjustments For Income And Expenses

Question 1

Why are adjustments made?

Answer 1

For preparing the financial statements so that they reflect the true figures for the specific financial year
Expenses/ income shown in the income statement must be adjusted so that they relate only to the period of time covered by this account

Question 2

State the matching/ accrual principle

Answer 2

Profit is the difference between the revenue and expenses incurred in the same financial year

Question 3

State the prudence principle

Answer 3

Question 4

Explain the need for accrued income

Answer 4

Question 5

Explain the need for accrued expenses

Answer 5

Question 6

Explain the need for prepaid expenses

Answer 6

Question 7

Explain the need for income received in advance

Answer 7

Question 8

Explain accrued expenses

Answer 8

Expenses for which the benefit has been received but which has not been paid for by the end of the accounting period

Question 9

Explain prepaid expenses

Answer 9

An expense which has been paid in advance of which the benefits will be received in the next financial year

Question 10

Explain income received in advance

Answer 10

Income received during the current financial year but that is for the following financial year

Question 11

Explain accrued income

Answer 11

Income that is due for the current financial period, but not yet received by the en of the financial period