Balance Day Judgements & Cash Flow Stataments

Question 1

Accrual Accounting

Answer 1

Determining profit By recognising revenue as earned when the good/service is provided against the expenses incurred when the benefit is consumed in the current reporting period.

Question 2

Balance day adjustments

Answer 2

A change made to a revenue or expense on balance day to show revenue earned and expenses incurred in a particular reporting period. So that profit can be calculated accurately.

Question 3

What is the need for balance day adjustments

Answer 3

To ensure profit can be calculated accurately by comparing revenues earned against expenses incurred.

Question 4

Accounting Principle & Qualitative Characteristic

Answer 4

Reporting period & relevance

Question 5

Types of Balance day adjustments

Answer 5

• stock loss and gain
• prepaid expenses
• accured expenses
• depreciation

Question 6

Pre paid expenses

Answer 6

An expense that has been paid but is yet to be consumed.
Where the actual expense consumed is put into the income and taken away from the prepaid amount time be a current asset in the balance sheet.

Question 7

Accured Expenses

Answer 7

An expense that has been incurred but not yet paid.
The amount incurred will be totalled for the income statement as it was used up in that period and the amount yet to be paid will be put in the balance sheet as a current liability.

Question 8

Straight line depreciation

Answer 8

       Life of the asset

Historical cost X depreciation rate

Question 9

Accumulated depreciation

Answer 9

the value of a non- current asset that has been consumed over its
life so far, the value calculated after which depreciation has been built up over times so far.

Question 10

Carrying value

Answer 10

the value of a non- current asset that is yet to be consumed, the value of the asset that is a result of the accumulated depreciation been taken from the historicising cost.

Question 11

Cash flow statement

Answer 11

accounting report that reports all cash ows during a reporting period,
classi ed as Operating, Investing and Financing activitie

Question 12

Investing activities

Answer 12

cash flows related to the purchase and sale of non- current assets

Question 13

Operating activities

Answer 13

cash flows related to day- to-day trading activities

Question 14

Financing activity

Answer 14

cash flows related to changes in the financial structure of the firm. The cash transactions that change loans and owners equity.

Question 15

Use of cash flow statement

Answer 15

• decision making, source and use of cash
• meeting cash target
• planning future cash activities
• generating enough cash from operations to fund investing and financing activities

Question 16

Use of FIFO

Answer 16

the assumption that the stock that is purchased first will be sold first, to determine the cost price of goods as there is no way of knowing actual cost price of stock when sold to consumers

Question 17

Use of FIFO

Answer 17

the assumption that the stock that is purchased first will be sold first, to determine the cost price of goods as there is no way of knowing actual cost price of stock when sold to consumers

Question 18

Use of FIFO

Answer 18

the assumption that the stock that is purchased first will be sold first, to determine the cost price of goods as there is no way of knowing actual cost price of stock when sold to consumers

Question 19

Use of FIFO

Answer 19

the assumption that the stock that is purchased first will be sold first, to determine the cost price of goods as there is no way of knowing actual cost price of stock when sold to consumers