Week 1&2: Adjustments To Trial Balance

Question 1

Cost of Sales Equation

Answer 1

Cost of Sales = Opening stock + Stock purchased - Closing stock

Question 2

Difference between Accruals and Creditors

Answer 2

Accruals: Amounts owing at a point in time - bills for which have not been received at accounting year end (Estimates)

Creditors: Amounts owing at a point in time - bills for which have been received by accounting year end

Question 3

Depreciation

Answer 3

Relates to non-current assets and can be straight line or reducing balance

Question 4

Accrued expense

Answer 4

Goods received but aren’t paid for until the next financial period

Question 5

Prepaid expense

Answer 5

Goods have been paid for but not yet supplied

Question 6

Bad debt

Answer 6

When the customer has not payed for goods supplied to them - Written off

Question 7

Depreciation Calculation - Reducing Balance Method

Answer 7

NBV = Asset Cost - Accumulated Depreciation

Question 8

Depreciation calculation - Straight Line Method

Answer 8

(Cost - Residual Value)/Useful Economic Life

Question 9

Straight Line Depreciation

Answer 9

Equal amount treated as an expense over assets useful life

Question 10

Reducing balance

Answer 10

Fixed % applies to NBV

More economic benefit consumed earlier on