Period-end Adjustments Relating to the Preparation of Financial Statements：練習問題

According to the accrual concept, which of the following statements regarding the adjustment of expenses at the end of an accounting period is correct?

Which of the following would be classified as revenue expenditure for a logistics company?

According to the accrual basis of accounting, which of the following statements is true regarding the recognition of expenses and revenues?

What is the effect on the current assets of a business if the adjusting entry for prepaid insurance is omitted at the period-end?

State the accounting principle that necessitates the recognition of expenses in the same accounting period as the revenues they helped generate, even if cash has not yet been exchanged.

The following unadjusted account balances were taken from the books of Omega Services as at 31 December 2023:

Salaries Expense: \(HK\$180,000\)
Rental Income: \(HK\$60,000\)
Trade Receivables: \(HK\$150,000\)
Allowance for Doubtful Debts (1 January 2023): \(HK\$6,000\)
Motor Vans (at cost): \(HK\$200,000\)

Additional information:

(i) Salaries for December 2023 amounting to \(HK\$15,000\) have not yet been paid or recorded.

(ii) Rental income includes an amount of \(HK\$10,000\) received in advance for the months of January and February 2024.

(iii) A trade debtor who owed \(HK\$5,000\) was declared bankrupt. The company decided to write off this debt and adjust the allowance for doubtful debts to \(5\%\) of the remaining trade receivables.

(iv) Motor vans are to be depreciated at \(10\%\) per annum on cost.

Required:

(a) Prepare the adjusting journal entries as at 31 December 2023. Narrations are not required. (3 points)

(b) Calculate the total amount of current liabilities as at 31 December 2023 based on the above adjustments. (1 point)

(c) State the accounting principle applied when recognizing the accrued salaries in (i). (1 point)