Accounting · Study Guide
Key Points
Matching concept requires that income and expenses are recognized in the period they relate to, not when cash moves
Accruals (payables) and prepayments (receivables) adjust accounts for expenses and income not yet paid or received
Depreciation and irrecoverable debts are non-cash adjustments that affect the true profit or loss
Exam Focus
Apply adjustments correctly in financial statements. Distinguish between accruals (expenses not yet paid) and prepayments (expenses paid in advance).
Must-Know Terms
Cross-Theme Connections
Verification of accounting records
Adjustments are made after verification of the trial balance
Preparation of financial statements of sole traders
Adjusted figures feed directly into sole trader financial statements
Limited company accounts
Limited companies follow the same adjustment principles