BSBFIA401 Question2.docx - BSBFIA401 Prepare financial...

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BSBFIA401 Prepare financial reports Question 2.1 What are non-current and fixed assets? Ans: Non-current assets are assets that cannot be easily and readily converted into cash and cash equivalents. Non-current assets are also termed fixed assets, long- term assets, or hard assets. Examples of non-current or fixed assets include: Land. Building. Question 2.2 What are adjusting entries and for what purpose are they used? Ans: 1. An adjusting journal entry is an entry in a company's general ledger that occurs at the end of an accounting period to record any unrecognized income or expenses for the period. Adjusting journal entries can also refer to financial reporting that corrects a mistake made previously in the accounting period. 2. The purpose of adjusting entries is to convert cash transactions into the accrual accounting method. Accrual accounting is based on the revenue recognition principle that seeks to recognize revenue in the period in which it was earned, rather than the period in which cash is received.

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