Accounting lec 6

• What are the types of accounting adjustments mentioned?

  Accrued expenses, prepayments, depreciation
• How do adjustments impact financial statements?

  They affect the Income statement and Statement of financial position
• What does depreciation measure?

  Usage of non-current assets over time
• What causes the using up of non-current assets?

  Physical deterioration, obsolescence, passing of time
• Why do non-current assets have a limited life?

  They are consumed in generating revenue
• What does depreciation measure in a specific period?

  Proportion of the asset's cost that has deteriorated
• What are the two main depreciation methods?

  1. Straight-line method
  2. Reducing-balance method
• How do you calculate annual depreciation using the straight-line method?

  Cost minus residual value divided by useful life
• What is the annual depreciation expense for a machine costing £100,000 with a 4-year life?

  £25,000
• What percentage does depreciation represent when the residual value is £0?

  25% of the cost of the asset
• How does accumulated depreciation change over the years in the straight-line method?

  It increases by the same amount each year
• How is depreciation calculated in the reducing-balance method?

  As a percentage of the carrying amount
• What is the Year 1 depreciation expense for a machine costing £100,000 with a 20% rate?

  £20,000
• What is the carrying amount after Year 1 in the reducing-balance method?

  £80,000
• What is the Year 2 depreciation expense for a carrying amount of £80,000 at a 20% rate?

  £16,000
• How is depreciation shown in the Income Statement?

  As an expense for the year
• How are non-current assets recorded in the Statement of Financial Position?

  Cost and accumulated depreciation are recorded separately
• What is the formula for the accounting equation?

  Assets = Liabilities + Equity

  
• What does a debit in an asset account indicate?

  Increase in the asset

  
• What does a credit in a liability account indicate?

  Increase in the liability
• What happens to the sum of debits and credits in double-entry accounting?

  They must be equal
• What are the key components of double-entry accounting?

  • Assets
  • Liabilities
  • Equity
  • Income
  • Expenses

  
• What is recorded when cash sales of £5,000 occur?

  Cash increases and sales increase
• What is the journal entry for cash sales of £5,000?

  Debit Cash £5,000, Credit Sales £5,000
• What is the journal entry for purchasing furniture for £3,000 cash?

  Debit Furniture £3,000, Credit Cash £3,000
• What is the journal entry for buying stock on credit for £10,000?

  Debit Inventory £10,000, Credit Trade payables £10,000
• What is the journal entry for paying monthly bills of £2,000?

  Debit Expenses £2,000, Credit Cash £2,000
• What is the journal entry for paying £8,000 to RSM Ltd?

  Debit Trade payables £8,000, Credit Cash £8,000
• What is the journal entry for making £3,000 cash sales and £7,000 credit sales?

  Debit Cash £3,000, Debit Trade receivables £7,000, Credit Sales £10,000
• What are the steps for recording journal entries in double-entry accounting?

  1. Identify the accounts affected
  2. Determine the amounts to be debited and credited
  3. Record the date and accounts in the journal
  4. Ensure debits equal credits
• What is the title of the presentation?

  Double-Entry Theory
• What is the date of the presentation?

  4 November, 2024
• What are the key components of journal entries in double-entry accounting?

  • Date
  • Accounts
  • Debit (Dr)
  • Credit (Cr)

  
• What was the initial cash amount Nancy started her business with?

  £50,000
• What did Nancy purchase on February 2nd?

  Furniture for £3,000 cash
• What was the amount of stock Nancy bought on credit from RSM Ltd on February 3rd?

  £10,000
• How much cash sales did Nancy make on February 4th?

  £8,000
• What was the amount paid for monthly bills on February 5th?

  £2,000
• How much did Nancy pay to RSM Ltd on February 6th?

  £8,000
• What were the total cash and credit sales made on February 7th?

  £3,000 cash and £7,000 credit