Year End Adjustments
In the examples which we have looked at so far we have considered that the expenses and income which we have entered in our accounts relate exactly to the period for which we are preparing the profit and loss account. For example, if there was a debit of £550 on the rent account, we assumed that that was the rent expense for that accounting period. We shall now consider the accounting treatment where that is not the case and either there is rent owing at the balance sheet date or there is rent paid in advance at the balance sheet date. In both of these cases the amount appearing in our rent account does not represent the true rent expense for that accounting period.
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