chapter 10 Flashcards
accrual
an expense that is due within the accounting year but has not been paid.
prepayment
a payment made by a business in advance of the benefits to be derived from it
how are accrued expenses treated in an account
it is a current liability and liabilities have credit balances. they have credit balance b/d figures
how are prepaid expense in an account
it is a current asset and assets have debit balances. they have debit balance b/d figures
rental income
the income earned from allowing someone to use your premises
interest earned
the income earned from monies that have been invested or lent
commission earned
a form of income that is often earned as a result of selling goods on behalf of somebody else
other payables
the current liability (money owed by the business) arising from late payment of expenses or early receipt of an income. all payables must be combined and presented as one figure
other receivables
the current asset (money owed to the business) arising from early payments of expenses or late receipt of an income. receivables must be combined and presented as one figure
how are accrued expenses treated in statement of profit or loss
add to figure shown in the trial balance- this will increase the expense to show the total amount of expense incurred
how are prepaid expense treated in statement of profit or loss
deduct from amount in the trial balance-this will reduce the expense to show the total amount of expense incurred
how are accrued income treated in statement of profit or loss
add to figure shown in the trial balance- this will increase the expense to show the total amount of income earned
how are prepaid income treated in statement of profit or loss
deduct from amount in the trial balance-this will reduce the expense to show the total amount of income earned
