What is the effect of given adjustments on Trading Profit Loss-00038
This subjective question is related to the book/course
vu acc501 Business Finance.
It can also be found in
vu acc501 Mid Term Solved Past Paper No. 2.
- Accrued Expenses or Outstanding Expenses
- Prepaid Expenses or Unexpired Expenses
- Accrued Revenue or Revenue Receivable
- Unearned Revenue or Revenue Received in Advance
- Depreciation of Asset
Accrued Expenses or Outstanding Expenses
Trading and profit and loss account effect. These expenses will be shown in profit and loss account under administrative expenses and will and be deducted from gross profit. They will be used to calculate net profit. Balance sheet effect: These expenses will be shown as expense payable or accrued expenses in balance sheet as current liabilities and will be shown under current liabilities section of liabilities as they have to be paid by business.
Prepaid Expenses or Unexpired Expenses
Trading and profit and loss account effect. These will be deducted from relevant expense account to get the actual expenses for the period and that actual amount of expense will be deducted from gross profit to arrive at net profit. This amount of prepaid expenses will not be included in profit and loss account as an expense itself but its effect will be on current expenses for the period for which profit and loss is being calculated. Balance sheet effect: These prepaid expenses will be show and current assets in balance sheet and will be shown under the section of current assets in balance sheet.
Accrued Revenue or Revenue Receivable
Trading and profit and loss account effect. These will be added to sales in trading account in profit and loss statement and will be treated as a revenue in the calculation of gross profit by subtracting cost of goods sold from net sales. This will affect gross profit in trading account.
