Topic 12 - Other receivables/other payables

Question 1

What is the purpose of making adjustments for other receivables and other payables?

Answer 1

To produce a set of accounts that provide a true and fair view of a firm’s financial circumstances. This allows a more meaningful comparison of financial statements year on year.

Question 2

What are other receivables?

Answer 2

Monies owed to the company, other than monies owed by trading customers.

Question 3

What are other payables?

Answer 3

Monies owed by the company, other than monies owed to trading suppliers.

Question 4

What accounting principles do other receivables and other payables follow and how?

Answer 4

Accruals concept: Revenues and costs should be recognised when they are earned or incurred, not when received or paid. Therefore, we transfer to the income statement only the amounts related to that accounting period.

Question 5

What is an expense accrued?

Answer 5

An expense owing at financial year end. This is a current liability.

Question 6

What is an expense prepaid?

Answer 6

An expense at financial year end that has been paid for the following month(s). This is a current asset.

Question 7

What is income accrued?

Answer 7

An income at financial year end that is still owing to the firm. This is a current asset.

Question 8

What is income prepaid?

Answer 8

An income at financial year end that has been paid for the following month(s). This is a current liability.