Tag: End of Period Adjustments

Expenses and Revenues

Reasons for adjustments in revenue and expense accounts The Accruals Concept of accounting states that in calculating net profit the expenses for the period should be subtracted from the revenues generated in the same period. The process by which the revenues and expenses for the period are ascertained is referred to as matching expenses with…...

Accruals and Prepayments in the Balance Sheet

Prepaid expenses represented assets of the business. The total of prepaid expenses will be listed in the balance sheet immediately under debtors as a current asset. Accrued expenses are a form of current liability and will be listed in the balance sheet under current liabilities. Read more →...

Distinction between Bad Debts and Doubtful Debts

When debtors fail to settle their accounts for items sold on credit a bad debt will occur. A bad debt is an amount that is written off by the business as a loss to the business and classified as an expense because the debt owed to the business is unable to be collected, and all…...

Provision for Depreciation

Depreciation refers to two very different but related concepts: (1) The decrease in value of assets (fair value depreciation) (2) The allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle). Causes of depreciation The former affects values of businesses and entities. The latter affects net…...