Expenses Expense transferred to P&L A/c = Expense Paid + Accrued Expense

Expense transferred to P&L A/c = Expense Paid - Prepaid Expense

Revenues Revenue transferred to P&L A/c = Revenue Paid + Accrued Revenue

Revenue transferred to P&L A/c = Revenue Paid - Prepaid Revenue

Found in Trial Balance Additional Notes

We add Accruals and Subtract Prepayments

1. Accruals and Prepayments in the Balance Sheet

Current Assets Current Liabilities

Prepaid Expenses Accrued Expenses
Accrued Revenues Prepaid Revenue

2. Bad Debts written off is an expense goes in the Profit and loss A/c
3. Provision for Bad Debts

Profit and loss A/c First year of Provision for Bad debts, use amount give in TPL and BS.
Increase in Provision for Bad Debts (Expense) record amount of the
increase. Use difference between previous and current year.
Decrease in Provision for Bad Debts (Revenue) record amount of the
decrease. Use difference between previous and current year.
Balance Sheet Current Assets (Debtors-Provision for Bad Debts) use the total Provision not
difference.

4. Depreciation

Profit and loss Account Expense (Amount for the year)

Balance Sheet Fixed Asset – Depreciation (Use Accumulated Amount)
Depreciation amount may be given or calculated.

Common Methods of Calculation

1. You may be given a percentage to calculate a percentage of the cost.

Straight Line Method

Depreciation= Cost-residual value or Cost

# of years ` # of years
***Note Same amount used each year.

Reducing Balance Method

Year1 Cost * Rate

Year 2 onwards
(Cost – previous Depreciation )* rate