How do we know that part of the insurance is prepayments at the end of the year if we only credit cash and debit insurance when the transaction happened?
There are the four ‘standard’ adjustments that always need to be made. In addition, of course, any errors discovered will be corrected, but that is a separate issue – a correction rather than an adjustment.
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why we took 1000 as previous prepayment from 1 jan to 31 jul instead of 1200?
Dear Sir,
It is still confusing for me that why prepayment of last year is still added in this year?
If you prepaid last year it means that you paid already for part of this year. So the amount prepaid is part of this years expense.
How do we know that part of the insurance is prepayments at the end of the year if we only credit cash and debit insurance when the transaction happened?
Because always with insurance you will know what period you are paying for – it will be on the invoice!
I see, thanks a lot
oh, I’ve got that, thanks for this useful video
do we only have four adjustments before the preparation of financial statements?
There are the four ‘standard’ adjustments that always need to be made. In addition, of course, any errors discovered will be corrected, but that is a separate issue – a correction rather than an adjustment.
Really detailed.