Balance Day Adjustments

Question 1

Prepaid expenses

Answer 1

These are expenses that have been paid in advance on balance day. The service or benefit has been paid for but has not expired or been completely consumed by balance day. (Asset - Dr)

Question 2

Stock of Supplies

Answer 2

Supplies are materials purchased for use within the business and are not intended for resale at a profit. For example, stationery. Stock of supplies is very similar to a prepaid expense.

Question 3

Accrued Expenses

Answer 3

Accrued expenses are goods or services that has been used or consumed but not paid for. (Liability - Cr)

Question 4

Unearned Income/Prepaid Income/Income received in advance

Answer 4

All of these terms refers to when cash is received despite the good or service not being provided. (Liability - Cr)

Question 5

Accrued Income

Answer 5

This represents goods or services that has been provided (earned) but the cash has not yet been received. (Asset - Dr)

Question 6

Bad Debts

Answer 6

Bad debts refers to an amount owed to the business is written off from Account Receivable due to being unable to pay off the debt during the accounting period.

Question 7

Doubtful Debts

Answer 7

Doubtful debts are estimations of the amount of income unlikely to be received from debtors during the accounting period.

Question 8

Provision/Allowance for Doubtful Debts

Answer 8

This is an account which is a combination of bad debts and doubtful debts and acts as a way in matching income and expenses by estimating present accounts receivable who are unlikely to pay their debts in the next accounting period.