ACCT1501 Lecture Notes - Lecture 4: Accounting Information System, General Ledger, Financial Statement
11 Nov 2018
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Prepayments are considered assets because they imply future eco benefits! (ie. paying for something beforehand to receive a future g&s) E. g you spend ,000 on 24months rent in advance. However, after 12 months when of service has been delivered (ie. you have rented it for half a year) When prepayment is used and benefit is used, it becomes an expense. Explain the various steps (9 steps) in the accounting cycle. Judgement is required to determine: relevant events to record, when and how events enter the accounting system. External: exchange of items of economic value. Involves a party external to business: evidence (documentation) exists, measurable in monetary units, payment of wages and salaries to employee. Adjustments to records that introduce new data or alter existing data. E. g internal transaction depreciation (increase in expense, decrease in assets) Accounting cycle: balance sheets are permanent accounts.
