Flashcards in Y-E Adjustments Deck (15)
What are the 3 pair of account categories; and how do you increase them?
Income - Cr
Expenditure - Dr
Assets - Dr
Liabilities - Cr
Capital - Cr
Drawings - Dr
Which account go on the Statement of Profit and Loss (SPL)?
The other 4 go on Statement of Financial Position (SFP)
How is VAT treated?
It always goes on the same side as the NET
Why are adjustments made at the year-end?
Match the period of income with the expenses incurred;
Don't overstate the profits due to events that occurred outside the accounting period;
Allow the reader to compare the figures with those of other periods.
What is Inventory?
Stock that hasn't yet been sold and at the same time assets to the business.
How will depreciation be shown in the financial statements?
The annual depreciation will be shown as an expense in the SPL
The accumulated depreciation will be shown as a reduction in non-current asset value in the SFP
How will irrecoverable debts affect the financial statements?
They will be shown as an expense in the SPL; and
They will reduce the value of trade debtors (Receivables) in the SFP.
How will Debts Recovered affect the financial statements?
It will show as income (calculated after gross profit) in the SPL; and
It will increase the bank or cash in the SFP.
What effect will Allowances for Doubtful Debts have on the financial statements?
It will be an expense whenever it is created and whenever irma is increased (SPL);
Shown as income in the SPL whenever it is reduced; and
Reduces trades receivable in the SFP
How will Disposal Of Non-Current Assets affect the financial statements.
If it is a loss then it will show as an expense in the SPL;
If it is a profit then it will show as Income in the SPL; and
It will reduce the non-current asset in the SFP.
How are Goods For Own use recorded in the financial statements?
They will increase revenue in the SPL; and
Increase Drawings in the SFP.
By which other name are Interest Charges known by?
Which accounts will be missing if there is a Cost Of Sales Account?
If there is a Cost Of Sales account, what happens to the closing Inventory account?
It still appears but it only affects the SFP as a debit entry.