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VICAccountingQuick questions
Unit 3: Financial accounting for a trading business
Quick questions on Balance day adjustments under accrual accounting (VCE Accounting Unit 3)
5short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What are prepaid expenses?Show answer
A prepaid expense is an expense paid in cash before it is incurred, such as insurance paid 12 months in advance. At the time of payment it is recorded as an asset (a future economic benefit). At balance day, the portion that has now been consumed is transferred to expense:
What are accrued expenses?Show answer
An accrued expense is an expense incurred but not yet paid, such as wages owing at balance day. The benefit has been consumed, so it must be recognised:
What is prepaid revenue?Show answer
Prepaid (unearned) revenue is cash received before the revenue is earned, such as a customer paying in advance. When received it is a liability because the business owes a service or goods. At balance day, the earned portion is recognised:
What is accrued revenue?Show answer
Accrued revenue is revenue earned but not yet received, such as interest earned but not yet banked. It is recognised because it has been earned:
What is accrued wages adjustment?Show answer
Accrued Wages of 600 dollars is reported as a current liability.
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