1How do you close expense accounts?
Debit Income Summary and Credit XXX expense
2What is cost of sales?
The cost incurred to buy the goods that was sold
3What are prepaid expenses?
They refer to the amount of other expenses in a business that was paid in advance before services are used/incurred
4What are prepaid expenses recorded as in the statement of financial position?
Current assets as prepaid XXX expense
5What are expenses payable?
They refer to the amount businesses have yet to pay for the services they have already used/incurred during the financial period
6What are expenses payable recorded as in the statement of financial position?
Current liabilities as XXX expense payable
7What is the matching theory
Expenses incurred must be matched against the income earned in the same period to determine the profit for that period
8What is the accrual basis of accounting?
Expenses must be recognised in the period the services have been used, regardless of whether they have been paid for or not
9What do you record an other expense as under the statement of financial performance
Less: other expense — XXX expense — $XXXX
10If at the start of the year a business has prepaid expenses, how should it be recorded?
Debit XXX expense (Exp+) and credit prepaid XXX expense (CA-)
11If at the start of the year a business has expenses payable, how should it be recorded?
Debit XXX expense payable (CL-) and credit XXX expense (Exp-)
12If at the end of the year a business has prepaid expenses, how should it be recorded?
Debit Prepaid XXX expense (A+) and Credit XXX expense (Exp-)
13If at the end of the year a business has expenses payable, how should it be recorded?
Debit XXX expense (Exp+) and Credit XXX expense payable (CL+)