adjustments in the trial balance Flashcards
what is a trap balance?
it is created after DEBK out of the balance brought down from each account
why is there adjustments?
there is a second trail balance and things may be recognised at the year end
such as if some expenses helped tp general the next years revenue not this year
what is the equation for the matching concept?
expense = sales revenue
what are prepayments?
amounts that are paid in advance to suppliers of services
payment one year and benefit the next
with prepayments what do you write in each statement?
- income: you write only what you have paid an received the benefit for this year
- SOFP: you record the prepayment (current asset)
what is an accrual?
amount still owing at the end of the year
befits received one year and payment the next
with accruals what do write one each statement?
income: the expense from the year
SOFP: what you owe as it is a current liability
what are bad and doubtful debts?
based one prudence concept
ideal scenario does not always happen
bad debts = not going to pay
doubtful = not sure
with bad and doubtful debts how are they recorded in each statement?
income: expense
SOFP: assets - TR
how do you record bad debts?
take away the bad debts from the TR
how do you record doubtful debts?
write underneath bad debts, minus a percentage each year of the debts e.g 10% doubtful debts provision is taken off
