Balance Day Adjustments - Introduction

Transactions are recorded when they have an economic effect on the business.

• Accrual accounting

• Cash accounting

Transactions are recognised only on the date that cash is received or paid

• Accrual accounting

• Cash accounting

An expense that has not been paid, but is owed in the current accounting period.

• Prepaid expense

• Prepaid Revenue

• Accrued expense

• Cash expense

An expense that has been incurred but the payment has not yet been made.

• Prepaid expense

• Accrued expense

• Prepaid Revenue

• Cash expense

Income that has not been received, but is due in the current accounting period

• Accrued Revenue

• Prepaid Revenue

• Cash Income

• Prepaid Expense

Income has been earned but the cash has not yet been received.

• Prepaid Revenue

• Cash Income

• Unearned Income

• Accrued Revenue

An expense that has been paid in one period and the benefits will be received in the subsequent

• Accrued Expense

• Prepaid Expense

• Cash Expense

• Unearned Expense

Money has been paid for a good or service and the future economic benefits have not been received or consumed

• Accrued Expense

• Cash Expense

• Expense

• Prepaid expense

This requires that the life of a business be divided into equal periods of time for reporting.

• Accounting Entity Assumption

• Relevance

• Accounting Period Assumption

• Going Concern Assumption