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Lecture 07 Dated 26-10
Lecture 07 Dated 26-10
Chapter 28
Accruals and prepayments and
other adjustments for financial
statements
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.2
Learning objectives
After you have studied this chapter, you
should be able to:
Adjust expense accounts for accruals and
prepayments
Adjust revenue accounts for amounts
owing
Show accruals, prepayments and revenue
accounts receivable in the statement of
financial position
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.3
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
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Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.5
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.6
Accrued expenses
Rent of £4,000 per year as payable at the
end of every three months. The rent was
paid on time in March, but this is not
always the case.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.8
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
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Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.10
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.11
Prepaid expenses
Insurance for a business is at the rate of
£840 a year, starting from 1 January 2011.
The business has agreed to pay this at the
rate of £210 every three months. However,
payments were not at the correct times.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.12
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.13
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.14
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.15
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.16
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.17
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.18
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.19
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.20
Activity
(A) On 31 December 2010, three months’ rent
amounting to a total of £3,000 was owing.
(B) The rent chargeable per year was £12,000.
(C) The following rent payments were made in the
year 2011: 6 January, £3,000; 4 April, £3,000;
7 July, £3,000; 18 October, £3,000.
(D) The final 3 months’ rent for 2011 is still owing.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.21
Activity (Continued)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.22
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.25
Learning outcomes
You should have now learnt:
1. That adjustments are needed so that the
expenses and income shown in the financial
statements equal the expenses incurred in
the period and the revenue that has arisen in
the period
2. That the balances relating to the adjustments
will be shown on the statement of financial
position at the end of the period as current
assets and current liabilities
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 28.26