Heya students, here's a quick checklist for income and expenses that you need to be able to answer in order to score well for these 2 chapters :)

Do I know enough about income and expenses?

• Can I explain accrual basis of accounting?
• Can I explain matching theory?
• Can I explain the difference between prepaid and received in advance?
• Can I classify prepaid/received in advance under the correct accounting element?
• Can I perform the 4 sets of journal entry for income & expenses?
• How do I calculate the total income/expenses for the year?
• Can I prepare the financial statement extract for income & expenses?

Income

Income received in advance must be ADDED to the new financial year

• Income received in advance + income received by cheque - income received in advance OR + income receivable = total income for the year

Income receivable must be MINUSED from the new financial year

• Income receivable + income received by cheque - income received in advance OR + income receivable = total income for the year

Expenses

Prepaid expenses must be ADDED to the new financial year

• Prepaid expenses + expenses paid by cheque - prepaid expenses OR + expenses payable = total expenses for the year

Expense payable must be MINUSED from the new financial year

• Expenses payable + expenses paid by cheque - prepaid expenses OR + expenses payable = total expenses for the year

Common tricky phrasings to look out for

Students need to calculate the total rent expense for the year on their own (E.g $1200 * 12 months)

Question will state the amount earned/expenses incurred and students will need to minus or add on their own from there

Fee income is stated → students need to identify that it is a service business and not add it under “Add: other income”