L INCOME STATEMENT EXTRACT e) Add the depreciation expenses in the income statement LESS EXPENSES DEPRECIATION Income Statement For Paul's Pottery for the year ended June 2017 TOTAL DEPRECIATION EXPENSE L 1) What are balance day Adjustments and why are they done? 2) On which accounting concepts are balance day adjustments based? ACCRUED REVENUE 3) Why is accrued revenue a current asset? 4) Assuming a 12 month accounting period ending on 30 June 2018, complete the General Journal & ledger accounts if a business has interest owing from an investment of $500. Date Account Debit Credit L + 5) Assuming a 12 month accounting period ending 30 June 2018, complete the General Journal and ledger accounts if a business expects to receive a commission of $2 400 on 30 October for work performed over the previous 6 months Date Account Debit Credit L 6) Assuming a 12 month accounting period ending on 30 June 2018, complete the General Journal and ledger accounts if a business deposits $12 000 into a fixed interest account on March 31, 2018 and expects to receive 10% p.a. interest payable the following year (i.e. on April 1, 2019) L Date Account ACCRUED EXPENSES 7) Why are accrued expenses a liability? Debit Credit 8) Assuming a 12 month accounting period ending on 30 June 2018, complete the general journal and ledger accounts if a business has a telephone bill of $250 on balance day. Date Account Debit Credit 9) Assuming a 12 month accounting period ending on 30 June 2018, complete the General Journal and ledger accounts if a business expects to receive a bill of $2100 on 1 September 2018 for the use of gas for the previous three months Date Account Debit Credit L 7 PREPAID REVENUE (REVENUE RECEIVED IN ADVANCE) 10) Why is revenue received in advance (prepaid revenue) a current liability? 11) Assuming a 12 month accounting period ending on 30 June 2018, complete the General Journal and ledger accounts if a firm has sales made in advance of $95? Date Account Debit Credit L 12) Assuming a three month accounting period ending 31 March 2018. Complete the General Journal and ledger accounts if a business receives rent of $6 000 on February 28 for the next 6 months Date Account Debit Credit Sales Revenue 28/2 Bank $6.000 L 7 7 13) A business receives $9 600 on January 31 for the next 12 months rent. Complete the General Journal and ledger accounts for the period ended 30 June. Date Account Debit Credit Rent Revenue 31/1 Bank $9600 PREPAID EXPENSES 14) Why are prepaid expenses an asset? 15) Assuming a 12 month accounting period ending on 30 June 2018. Complete the General Journal and ledger accounts if a business has paid insurance in advance of $90 on balance day. Date Account Debit Credit 16) Assuming an accounting period on 30 June 2018. Complete the General Journal and ledger accounts for the following adjustments. a) A business paid $1800 for nine months insurance on 1 January 2018. b) A business paid $60 on March 31 for a 12 month magazine subscription. Date Account Debit Credit Date Account Debit Credit + 1/1 Bank Insurance Expense $1 800 31/3 Bank Magazine Expense $60 17) Classify the following as an Accrued or Prepaid Revenue or Expense Dividends due not yet received Rates paid in advance Wages owing Acc Rev Acc Exp Prepaid Rev Prepaid Exp Rent revenue earned but not yet received Advertising paid in advance Advertising paid for the next 3 months Subscriptions collected in advance Deposits received from customers Electricity used but not paid Insurance paid in advance Interest due but not yet received SUMMARY: Each Balance day adjustment has: One effect on the income statement and One effect on the balance sheet L Balance Day Adjustments are: Based on the Accounting Period Concept and Realisation Concept Balance Day adjustments are made at the end of the accounting period. It is an attempt to show more accurate profit and loss and the values of assets and liabilities L