Font size
WorksheetsUnit 2 Topic 1 (2025)
Total questions: 38
Worksheet time: 23mins
Balance day adjustments are made to
ensure that the balance sheet balances
create additional revenue and balance sheet accounts
Change revenue or expense accounts on balance day so that they show revenue earned and expenses incurred in the period
create prepayments
Accrued expenses is what type of account?
Asset
Liability
Revenue
Expense
Transactions are recognised only on the date that cash is received or paid is which type of accounting
Accrual accounting
Cash accounting
An expense that has not been paid, but is owed in the current accounting period.
Prepaid expense
Unearned expense
Accrued expense
Cash expense
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
A prepaid expense is what type of account
Asset
Liability
Expense
Revenue
Rent of $250 was received in advance. The BDA would be:
DR Rent expense
CR Unearned Revenue
DR Accrued revenue
CR Rent Revenue
DR Rent revenue
CR Unearned revenue
DR Rent revenue
CR Accrued revenue
The trial balance shows prepaid advertising as $10,000. Of this amount, $1,500 is consumed. What is the Balance Day Adjustment journal entry?
Dr Advertising exp $1,500
Cr Prepaid exp $1,500
DR Prepaid exp $1,500
Cr Advertising $1,500
Dr Advertising exp $1,500
Cr Accrued exp $1,500
Dr Accrued exp $1,500
Cr Advertising exp $1,500
A customer paid $750 in advance for a service job that we will commence next financial year. What is the balance day adjustment journal entry?
Dr Accrued revenue $750
Cr Service fee revenue $750
Dr Service fee revenue $750
Cr Accrued revenue $750
Dr Service fee revenue $750
Cr Unearned revenue $750
Dr Unearned revenue $750
Cr Service fee revenue $750
Accrued Expenses are classified as:
an Asset
a Liability
an Expense
Revenue
Unearned Revenue are classified as:
Revenue
an Expense
a Liability
Assets
PEARs are Assets. What does the acronym stand for? (select all that apply)
Prepaid Expenses
Accrued Revenue
Unearned Revenue
Accrued Expenses
What is the primary purpose of balance day adjustments in accounting?
To increase the profit of a business
To ensure that all income and expenses are recorded in the correct accounting period
To reduce the amount of tax payable
To improve the appearance of financial statements
How does an accrued expense affect the financial statements?
It increases assets and decreases liabilities
It decreases assets and increases liabilities
It increases liabilities and decreases equity
It increases expenses and increases liabilities
Which of the following is a characteristic of a prepaid expense?
It is an expense that has been incurred but not yet paid
It is an expense that has been paid but not yet incurred
It is an income that has been earned but not yet received
It is an income that has been received but not yet earned
Which of the following is an example of an accrued revenue?
Rent received in advance
Interest earned but not yet received
Salaries paid in advance
Inventory purchased on credit
Which journal entry correctly records an accrued expense at the end of the accounting period?
Debit Expense, Credit Cash
Debit Expense, Credit Accrued Liabilities
Debit Accrued Liabilities, Credit Expense
Debit Cash, Credit Expense
The Financial Year occurs between which dates?
1 Jan 2025 to 31 Dec 2025
1 Jan 2025 to 30 Jan 2025
1 July 2024 to 30 June 2025
1 June 2024 to 31 July 2025
A Prepaid Expense is an expense that has been paid in the current accounting period but which will be incurred in the next accounting period.
True
False
Which of the following is an example of an accrued expense?
Interest earned but not received
Rent paid in advance
Salaries incurred but not yet paid
Cash received before service is provided
Under accrual accounting, expenses are recorded when:
They are paid
They are incurred, regardless of payment
The cash is received
The invoice is sent
How is a prepaid expense treated over time?
It becomes an expense as the benefit is received
It is always treated as an asset
It remains a liability until paid
It is written off immediately
Accrued expenses are typically listed in which section of the statement of financial position?
Current assets
Current liabilities
Non-current assets
Non-current liabilities
What is the general journal entry to adjust for an accrued expense?
Debit Expense, Credit Accrued Expense
Debit Accrued Expense, Credit Expense
Debit Expense, Credit Cash
Debit Cash, Credit Expense
What effect does the general journal entry for accrued revenues have on the ledger?
Increases both assets and revenues
Increases both liabilities and revenues
Decreases both assets and revenues
Decreases both liabilities and revenues
What is the general journal entry to adjust for a prepaid expense?
Debit expense & credit Prepaid expense
Credit expense & debit Prepaid Expense
Debit expenses & debit prepaid expense
Credit expense & credit prepaid expense
For a service business, revenue is recognised when:
cash is received for the work performed
goods are collected
the service is performed
a quote is given for work.
The Statement of Profit or Loss:
forms part of the double-entry procedure
is prepared in the ledger
can be prepared only at the end of the accounting year
is a report
Which of the following statements is incorrect?
Cash flows are inflows and outflows of cash and cash equivalents.
A Statement of Cash Flows shows flows from operating, investing and financing activities during a
period.
Owners’ drawings is an operating outflow.
The repayment of a loan is a financing cash outflow.
Look at the image - Which of the following statements is correct?
The insurance expense for the month will be $1500.
Service fees and advertising are operating flows.
The motor vehicle purchase is an operating flow.
Drawings is an operating flow.
The (a) divides the life of the business into arbitrary time periods. (answer has 3 words)
A net loss is made if the revenues for the period are (a) than the expenses for
the period.
The accrual basis of accounting recognises transactions and events when they have an economic impact
on the entity, rather than when the associated cash flows occur.
True
False
A Statement of Financial Position lists the revenue, expenses and assets of the organisation at a point in
time.
True
False
Revenue recognition occurs when cash is received.
True
False
