Balance day adjustments

What are balance day adjustments primarily done for?

• 
  To ensure the financial statements show the appropriate numbers at the end of each accounting period

• To correct errors in the cash flow statement

• To adjust the company's stock prices

• To record the sale of company assets

What is 'Residual Value'?

• 
  The value of an asset at the beginning of its useful life

• The total depreciation expense of an asset over its useful life

• The estimated amount that an entity would currently obtain from disposal of the asset at the end of its useful life

• The cost of an asset when it is new

What does carrying amount refer to?

• The initial cost of an asset before any depreciation.

• The amount at which an asset is recognized after deducting accumulated depreciation.

• The amount of depreciation that has been charged on an asset.

• The residual value of an asset after its useful life.

Which method of accounting for doubtful debts does not create an allowance in advance?

• The Direct Write Off Method

• The Allowance Method

• 
  The Aged Analysis Method

• The Percentage of Credit Sales Method

Which of the following statements is true regarding depreciation of non-current assets?

• 
  Land is subject to depreciation as it has a limited amount of economic benefits

• Depreciation adjustments do not need to reflect the decrease in economic benefits over time

• 
  Non-current assets can be recorded as expenses at acquisition

• Every non-current asset has its own accumulated depreciation account

What is the consequence of not recording prepayments for income on the Income Statement?

• There is no effect

• Income is understated

• 
  Income is overstated

• 
  Expenses are understated

What is the effect on the Statement of Cash Flows when an accrued expense is not recorded?

• Cash flow is understated

• Cash flow is overstated

• 
  No effect

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What happens to the allowance for doubtful debts when a consumer is declared a bad debt?

• 
  It decreases

• It remains the same

• It is not affected

• It increases

What is a doubtful debt?

• A doubtful debt is a debt that is considered highly probable to be collected by the creditor.
• A doubtful debt is a debt that is considered unlikely to be collected by the creditor.
• A doubtful debt is a debt that is fully paid off by the debtor.
• A doubtful debt is a debt that is certain to be collected by the creditor.