17.6. Adjustments in Final Accounts

Try these first

1. 1.

   What are outstanding expenses?

   Hint

   Think about expenses that are due but not yet paid.

2. 2.

   Define prepaid expenses.

   Hint

   Consider payments made in advance.

3. 3.

   What are outstanding expenses?

   • Expenses already recorded
   • Expenses incurred but not recorded
   • Expenses that are advance payments

   Hint

   Think about what expenses have not hit the records yet.

4. 4.

   True or false: Prepaid expenses are considered as liabilities.

   • True
   • False

   Hint

   Consider what kind of account they fall under.

5. 5.

   You are reviewing your company's financial records and find an accrued expense of ₹8,000 that was not recorded this period. How would this affect the Profit & Loss account and the Balance Sheet?

   Hint

   Think about how this expense reflects on overall earnings.

6. 6.

   A business owner neglected to adjust for ₹3,000 in bad debts. What impact does this have on the financial statements, and how would you rectify it?

   Hint

   Consider what happens when expected income is inaccurately reported.