✨Accrued items, such as rent revenue, need to be added to the income statement.
💡Prepayments, like prepaid salaries, need to be subtracted from the income statement.
🔍The provision for bad debts is calculated by comparing the existing provision with the new provision.
📉Depreciation for non-current assets is calculated based on the asset's cost and the depreciation rate.
💰Expenses, such as electricity and salaries, need to be subtracted from the income statement.
What is the difference between accrued items and prepayments?
—Accrued items are income or expenses that have been earned or incurred but not yet received or paid. Prepayments, on the other hand, are amounts paid in advance for goods or services that have not yet been delivered or received.
How is the provision for bad debts calculated?
—The provision for bad debts is calculated by comparing the existing provision with the new provision. The new provision is usually based on a percentage of the outstanding receivables or debtors.
How is depreciation calculated for non-current assets?
—Depreciation for non-current assets is calculated based on the asset's cost and the depreciation rate. There are different methods of depreciation, such as straight-line method and reducing balance method.
What expenses should be included in an income statement?
—Expenses such as salaries, rent, and electricity should be included in an income statement. These expenses need to be subtracted from the revenue to calculate the net profit or loss.
Why is it important to prepare an income statement with adjustments?
—Preparing an income statement with adjustments allows for a more accurate representation of the financial performance of a company. It ensures that all relevant income and expenses are accounted for, including accrued items, prepayments, and provisions.
00:00Introduction to preparing an income statement with adjustments, including accruals, prepayments, provision for bad debts, and provision for depreciation.
06:40Accrued items, such as rent revenue, need to be added to the income statement.
09:00Prepayments, like prepaid salaries, need to be subtracted from the income statement.
20:30The provision for bad debts is calculated by comparing the existing provision with the new provision.
25:10Depreciation for non-current assets is calculated based on the asset's cost and the depreciation rate.
30:15Expenses, such as electricity and salaries, need to be subtracted from the income statement.
35:45Wrap-up and importance of preparing an income statement with adjustments.
