End of year adjustments

What is depreciation?

• The price of a fixed asset when purchased

• An asset

• The difference between the cost price and amount received on disposal of a non current asset

• The difference between a fixed asset and a non current asset

What are two (2) causes of depreciation?

• Rust

• Time factor

• Depletion

• Balance sheet

There are two methods use to calculate depreciation. What are they?

• Straight line

• Acid test ratio

• Fifo

• Reducing balance

What is bad debt?

• An account owed by a receivable that will be paid

• When someone dies

• An account owed by a debtor that will not be paid

• When debtors are in debt

Explain what happens when a provision for doubtful debt account is increased.

Double entry for bad debts

• Debit provisions

• Debit bad debts

  Credit debtors name

• Debit debtors name

  Credit porfit and loss account

• Credit ledgers account

Explain what happen when a provision for doubtful debt is decreased

How is accured expenses treated in the balance sheet

• Fixed liability

• Fixed asset

• Gross profit

• Current liability

What is an accured expense

Explain what is meant by the term 'prepaid'