FAC1502 FINANCIAL ACCOUNTING
COMPREHENSIVE ANSWERS AND QUESTIONS SET
A+
✔✔ADJUSTMENTS - ✔✔Step one: Identify the accounts that must be adjusted.
Step two: Determine how the accounts would be affected.
Step three: Calculate the amounts involved in the adjustment.
Step four: Record the necessary adjustments in the general journal and past the entries
to the ledgers (s)
Step five: Ensure that the new balances of the accounts are now correct.
✔✔SHORT - TERM ADJUSTMENTS - ✔✔1. Prepaid Expenses
2.Acrrued Expenses
3. Consumable Inventory Adjustments
4. Income Received in Advance
5. Acrrued Income
6. Credit Losses
✔✔PREPAID EXPENSES - ✔✔An expense which has been paid during the current
financial period.
Temporary Asset - Dr (Debit)
✔✔ACCRUED EXPENSES - ✔✔An expense which relaes to the current financial
period, which is still unpaid at the end of that period.
Expense Account - Dr (Debit)
✔✔CONSUMABLE INVENTORY ADJUSTMENTS - ✔✔Expense account - Cr (Credit)
✔✔INCOME RECEIVED IN ADVANCE - ✔✔Income which has been received during
the current financial year but relates to a future period.
Income Account- Dr (Debit)
✔✔ACCRUED INCOME - ✔✔Income which relates to the current financial period but
which has not yet been received.
, Income Account - Cr (Credit)
✔✔CREDIT LOSSES - ✔✔Assets will decrease and an expense account or loss
component will be created. The debt will be written off against the profit and loss
account at the end of the year.
Asset Account - Cr (Credit) ---> Trade Receivables - Cr (Credit) ---> Credit Losses - Dr
(Debit)
✔✔LONG TERM ADJUSTMENTS - ✔✔1. Depreciation
✔✔DEPRECIATION - ✔✔A lessening in value.
Depreciation Account - Dr (Debit) ; The expense will be written off against the profit and
loss accounts.
✔✔PREPERATION OF THE TRIAL BALANCE - ✔✔1. Pre-adjustment trial balance
2. Post-adjustment trial balance
3. Post-closing trial balance
✔✔PRE-ADJUSTMENT TRIAL BALANCE - ✔✔Compiled to rest correctness of the
entries after the posting from the subsidiary journals to the general journal.
✔✔POST-ADJUSTMENT TRIAL BALANCE - ✔✔Compiled fter all journalised
adjustments have been posted to the general ledger.
✔✔POST-CLOSING TRIAL BALANCE - ✔✔Compiled after closing journal entries have
been posted to the ledger. All nominal accounts are closed and the profit or loss;
drawings are transferred to the capital account.
✔✔FINANCIAL PERFORMANCE OF A SERVICE ENTITY - ✔✔Service entities earn
income by delivering a service during the course of a financial period.
Nominal ----> Closing Entries ----> General Ledger
✔✔CLOSING PROCEDURE OF A TRADING ENTITY - ✔✔The relevant accounts
(gross profit) are closed off to the trading account.
✔✔INVENTORY SYSTEMS: PERPETAL INVENTORY - ✔✔Purchase of inventory --->
Inventory Account
✔✔INVENTORY SYSTEMS: PERIODIC INVENTORY - ✔✔Purchase of Inventory --->
Purchases Account
✔✔THE NATURE OF CASH AND CASH EQUIVALENTS - ✔✔Cash equivalents
include savings accounts or any investments that can be converted into cash in a period
less than 12 months. Current Assets.
COMPREHENSIVE ANSWERS AND QUESTIONS SET
A+
✔✔ADJUSTMENTS - ✔✔Step one: Identify the accounts that must be adjusted.
Step two: Determine how the accounts would be affected.
Step three: Calculate the amounts involved in the adjustment.
Step four: Record the necessary adjustments in the general journal and past the entries
to the ledgers (s)
Step five: Ensure that the new balances of the accounts are now correct.
✔✔SHORT - TERM ADJUSTMENTS - ✔✔1. Prepaid Expenses
2.Acrrued Expenses
3. Consumable Inventory Adjustments
4. Income Received in Advance
5. Acrrued Income
6. Credit Losses
✔✔PREPAID EXPENSES - ✔✔An expense which has been paid during the current
financial period.
Temporary Asset - Dr (Debit)
✔✔ACCRUED EXPENSES - ✔✔An expense which relaes to the current financial
period, which is still unpaid at the end of that period.
Expense Account - Dr (Debit)
✔✔CONSUMABLE INVENTORY ADJUSTMENTS - ✔✔Expense account - Cr (Credit)
✔✔INCOME RECEIVED IN ADVANCE - ✔✔Income which has been received during
the current financial year but relates to a future period.
Income Account- Dr (Debit)
✔✔ACCRUED INCOME - ✔✔Income which relates to the current financial period but
which has not yet been received.
, Income Account - Cr (Credit)
✔✔CREDIT LOSSES - ✔✔Assets will decrease and an expense account or loss
component will be created. The debt will be written off against the profit and loss
account at the end of the year.
Asset Account - Cr (Credit) ---> Trade Receivables - Cr (Credit) ---> Credit Losses - Dr
(Debit)
✔✔LONG TERM ADJUSTMENTS - ✔✔1. Depreciation
✔✔DEPRECIATION - ✔✔A lessening in value.
Depreciation Account - Dr (Debit) ; The expense will be written off against the profit and
loss accounts.
✔✔PREPERATION OF THE TRIAL BALANCE - ✔✔1. Pre-adjustment trial balance
2. Post-adjustment trial balance
3. Post-closing trial balance
✔✔PRE-ADJUSTMENT TRIAL BALANCE - ✔✔Compiled to rest correctness of the
entries after the posting from the subsidiary journals to the general journal.
✔✔POST-ADJUSTMENT TRIAL BALANCE - ✔✔Compiled fter all journalised
adjustments have been posted to the general ledger.
✔✔POST-CLOSING TRIAL BALANCE - ✔✔Compiled after closing journal entries have
been posted to the ledger. All nominal accounts are closed and the profit or loss;
drawings are transferred to the capital account.
✔✔FINANCIAL PERFORMANCE OF A SERVICE ENTITY - ✔✔Service entities earn
income by delivering a service during the course of a financial period.
Nominal ----> Closing Entries ----> General Ledger
✔✔CLOSING PROCEDURE OF A TRADING ENTITY - ✔✔The relevant accounts
(gross profit) are closed off to the trading account.
✔✔INVENTORY SYSTEMS: PERPETAL INVENTORY - ✔✔Purchase of inventory --->
Inventory Account
✔✔INVENTORY SYSTEMS: PERIODIC INVENTORY - ✔✔Purchase of Inventory --->
Purchases Account
✔✔THE NATURE OF CASH AND CASH EQUIVALENTS - ✔✔Cash equivalents
include savings accounts or any investments that can be converted into cash in a period
less than 12 months. Current Assets.
