Unit 4 outcome 1.1

Question 1

Balance day adjustment

Answer 1

Ensure profit is calculated accurately by matching revenue earned against expenses incurred in the current period. As a result, they ensure Relevance in accounting reports by ensuring that the income statement includes all information capable of making a difference in the decision making.

Question 2

Prepaid expense

Answer 2

A current asset that has been paid in advance in the current Period but is yet to be incurred

Question 3

Accrued expense

Answer 3

A current liability that arises when an expense has been incurred in the current period but has not yet been paid

Question 4

Pre-adjustment trial balance

Answer 4

A list of all General Ledger accounts and their balance before balance day adjustment have been made

Question 5

Post-adjustment trial balances

Answer 5

A list of all General Ledger accounts and their balances after balance day adjustment have been made. Post adjustment assists in ensuring that the closing entries and the income statement use the correct amounts. This ensures that the report provides information that is both relevant (definition) and also faithful representation (define).

Question 6

Bad debt

Answer 6

A debt that must be written off as irrecoverable because it has been confirmed that the account receivable is unable to pay due to liquidation or bankruptcy

Question 7

Doubtful debt

Answer 7

A debt that is unlikely to be collected in the future but has not yet been written off as it has not been confirmed that the account receivable is unable to pay

Question 8

Allowance for doubtful debt

Answer 8

A negative asset account that records the balance of doubtful debts

Question 9

Unearned revenue

Answer 9

A current liability that arises when cash is received in advance for revenue that is yet to be earned

Question 10

Accrued revenue

Answer 10

a current asset which arises when revenue has been earned but cash is yet to be received