POA lesson with Question and answer

What is prepaid expense? Expense already paid during the year but not yet used. What is expense payable? Expense already used but not yet paid Interpretation of the accounts :- Utilities Expense account 2020 Dr ($) Cr ($) Balance($) Jan 1 Prepaid utilities (1) 1300 1300 Dr Dec 31 Cash at bank (2) 7500 8800 Dr Utilities Payable (3) 1200 10000Dr Income summary (4) 10000  -- Item  (1)  = Utilities already paid in accounting year 2019 but not yet been used.  It will be used                      in the next accounting period, 1 Jan 2020 --31 Dec 2020.                      So, the transaction (1) was recorded to reverse the Utilities expense $1300 paid in                      advance last year  to be used this year. Item  (2) = Utilities was paid during the year 2020 by cheque. Item (3) = This Utilities payable was rec

After the pupils are able to identify the accounting elements of Assets, liabilities and equity, pupils will be able to draw up a simple statement of financial position.  The next thing is for them to use the other two elements, INCOME and EXPENSES  to draw up the statement of financial performance/income statement. An Statement of Financial Performance show how much income expenses and Profit or Loss a business has over a period of time -- Accounting period theory The aim of any business is to make Profit A business sells goods or provide services to earn income.  In earning the income, it has to incur expenses. Statement of financial performance measures an important figure called the PROFIT or LOSS for that period, which is the total income of a business less/minus all its expenses. A simple Statemenjt of financial performance of a Trading business comprises of two portion, ONE PORTION is the Trading and the SECOND PORTION is the Profit and Loss. Trading  Por