WorksheetsAdjustments Recap
Total questions: 15
Worksheet time: 11mins
What best describes depreciation in accounting?
Allocation of an asset’s cost over its useful life
Reduction in an asset’s market price
Recording repairs as expenses
A machine costing $12,000 has a useful life of 4 years and no residual value. What is the annual depreciation using straight-line method?
$2,500
4,000
$3,000
Which type of asset is normally depreciated?
Land
Office equipment
Inventory
A bad debt is best described as:
A receivable that is overdue
A debt that is written off as irrecoverable
A debt that may be collected later
When a bad debt is written off, which accounts are affected?
Cash and revenue
Allowance for doubtful debts and revenue
Bad debt expense and accounts receivables
A customer owing $800 is declared bankrupt and will pay nothing. What is the correct accounting treatment?
Create a doubtful debt provision of $800
Write off $800 as a bad debt
Increase profit by $800
A doubtful debt refers to:
A debt that may not be fully recoverable
A loan owed by the business
A debt already written off
Why is an allowance for doubtful debts created?
To reduce total sales
To eliminate all receivables
To apply prudence in financial statements
Receivables total $50,000. An allowance of 5% is required. What is the allowance amount?
$2,500
$2,250
$5,000
An accrual occurs when:
Cash is paid before the expense is incurred
Income is received in advance
An expense is incurred but not yet paid
At year-end, electricity expense of $600 is unpaid. What adjustment is required?
Expenses increase and liabilities increase
Expenses decrease and liabilities increase
Liabilities decrease and income increases
Accrual accounting mainly ensures that:
Cash balances are accurate
Expenses match the period they relate to
Profits are maximized
A prepayment is best defined as:
Income earned but not received
Payment made for a future expense
An expense incurred but not yet paid
Insurance of $2,400 is paid for 12 months starting 1 October. What amount is prepaid at 31 December?
$1,800
$600
$1,200
t year-end, part of an expense payment relates to the next accounting period. How does this affect the financial statements?
Liabilities increase and income decreases
Assets decrease and expense increase
Assets increase and expense decrease
