2.5 - Balance Day Adjustments [intermediate Quiz]

Accrued expenses refer to expenses that have been incurred but not yet paid. In this case, the driver's wages of $2450 have been earned by the driver but have not yet been paid. Therefore, it is classified as an accrued expense.

Accrued income refers to income that has been earned but not yet received. In this case, the dividends owing on shares that we have invested in another company have been earned by us as shareholders, but we have not yet received the actual payment. Therefore, it is considered as accrued income.

Accrued expense refers to expenses that have been incurred but not yet paid. In this case, the invoice for electricity has been received but not yet paid, making it an accrued expense. The amount of $1,092.50 includes GST, indicating that it is the total amount owed for the electricity usage.

Accrued income refers to the income that has been earned but not yet received. In this case, the interest owing on the term deposit has been earned by the company, but it has not been received yet. Therefore, it is considered as accrued income.

Accrued expense refers to expenses that have been incurred but not yet paid for. In this case, the interest owing on the loan represents an expense that has been accrued but not yet settled. The $450 represents the amount of interest that has accumulated up to the balance date. This amount will need to be paid in the future, but it has not yet been recorded as an actual payment. Therefore, the correct answer is accrued expense.

The given correct answer, "Bad Debts," refers to the practice of writing off debts that are considered uncollectible. In this case, the amount of $3,588, including GST, is being written off as a bad debt. This means that the company has determined that it is unlikely to receive payment for this amount, and therefore removes it from their accounts receivable. Writing off bad debts is a common accounting practice to accurately reflect the financial position of a company.

Accrued income refers to income that has been earned but not yet received or recorded. In this case, Phil's drawings account for the year ended 31/03/2012 is considered as accrued income because it represents the amount of money that Phil has withdrawn from the business during the year but has not yet been recorded as an expense. This amount will need to be recognized as income in the financial statements for the year, even though it has not been received yet.

The correct answer is "Income in Advance." This is because the business has paid two months' rent in advance, which means they have received income for those two months before actually providing the goods or services. This is considered income in advance because it is a payment received for a future period.

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The given information states that the depreciation on shop fixture and fittings is recorded at 20% per annum using the diminishing value method. This means that each year, the value of the shop fixture and fittings decreases by 20% of its remaining value. The cost of the shop fixture and fittings is $20,000 and the accumulated depreciation to date is $5,000. Since the accumulated depreciation is less than the cost of the shop fixture and fittings, it indicates that there are prepayments made for the depreciation expense. Therefore, the correct answer is Prepayments.

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