Match each accounting adjustment scenario at the end of the financial year with its correct treatment in the Profit and Loss Account and Balance Sheet of a sole trader.
- Accrued Expense (Expense owing at year-end)Added to the relevant expense in the Profit and Loss Account and shown as a Current Liability in the Balance Sheet
- Prepaid Expense (Expense paid in advance at year-end)Deducted from the relevant expense in the Profit and Loss Account and shown as a Current Asset in the Balance Sheet
- Accrued Income (Income earned but not yet received at year-end)Added to the relevant income in the Profit and Loss Account and shown as a Current Asset in the Balance Sheet
- Prepaid Income (Income received in advance at year-end)Deducted from the relevant income in the Profit and Loss Account and shown as a Current Liability in the Balance Sheet
Cevap
Accrued Expense matches with 'Added to the relevant expense in the Profit and Loss Account and shown as a Current Liability in the Balance Sheet'. Prepaid Expense matches with 'Deducted from the relevant expense in the Profit and Loss Account and shown as a Current Asset in the Balance Sheet'. Accrued Income matches with 'Added to the relevant income in the Profit and Loss Account and shown as a Current Asset in the Balance Sheet'. Prepaid Income matches with 'Deducted from the relevant income in the Profit and Loss Account and shown as a Current Liability in the Balance Sheet'.
Each item is correctly classified by matching the P&L adjustment direction (adding for accruals, deducting for prepayments) with its proper position in the Balance Sheet (liability for expense accruals and income prepayments; asset for expense prepayments and income accruals).
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Anahtar Kavram
Accounting Adjustments for Accruals and Prepayments under the Matching Principle